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Currency Differences in the Determinants of Corporate Bond Spreads: Evidence from Peruvian Issuers

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  • Gerald Alex Cisneros Rojas

    (Central Bank of Peru)

Abstract

This paper provides issuance-level evidence from an emerging economy with a dual-currency primary bond market, showing that currency denomination not only affects the level of corporate bond spreads but also fundamentally reshapes the transmission of macro-financial shocks across credit ratings. Using a comprehensive dataset of 1,323 corporate bond issuances between 2008 and 2024, we combine bond level characteristics, macro-financial conditions, and firm-level financial indicators to analyze how credit risk is priced across currency segments. We find clear evidence of currency segmentation in the pricing of corporate bonds. Spreads on USD-denominated bonds exhibit greater sensitivity to macro-financial conditions than those issued in local currency, particularly with respect to inflation and monetary policy variables. In addition, we document substantial heterogeneity across credit ratings, with lower-rated bonds displaying markedly stronger responses to macroeconomic shocks. A variance decomposition analysis shows that credit ratings are the dominant determinant of spread variation, explaining approximately 23% of total spread variance and more than 60% in the USD-denominated segment.

Suggested Citation

  • Gerald Alex Cisneros Rojas, 2026. "Currency Differences in the Determinants of Corporate Bond Spreads: Evidence from Peruvian Issuers," IHEID Working Papers 16-2026, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp16-2026
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    References listed on IDEAS

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    1. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    2. Eduardo A. Cavallo & Patricio Valenzuela, 2010. "The determinants of corporate risk in emerging markets: an option-adjusted spread analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(1), pages 59-74.
    3. Nusrat Jahan, 2022. "Macroeconomic Determinants of Corporate Credit Spreads: Evidence from Canada," Carleton Economic Papers 22-07, Carleton University, Department of Economics.
    4. Frank de Jong & Joost Driessen, 2012. "Liquidity Risk Premia in Corporate Bond Markets," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 2(02), pages 1-34.
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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