Monetary Policy and Corporate Bond Returns

Guo, Haifeng; Kontonikas, Alexandros; Maio, Paulo

doi:10.1093/rapstu/raaa005

Monetary Policy and Corporate Bond Returns

Guo, Haifeng; Kontonikas, Alexandros; Maio, Paulo

Authors

Dr Haifeng Guo haifeng.guo@durham.ac.uk
Assistant Professor

Alexandros Kontonikas

Paulo Maio

Abstract

We investigate the impact of monetary policy shocks on excess corporate bonds returns. We obtain a significant negative response of bond returns to policy shocks, which is especially strong among low-grading bonds. The largest portion of this response is related to higher expected bond returns (risk premium news), while the impact on expectations of future interest rates (interest rate news) plays a secondary role. However, the interest rate channel is dominant among high-grading bonds and Treasury bonds. Looking at the two components of bond premium news, we find that the dominant channel for high-rating (low-rating) bonds is term premium (credit premium) news.

Citation

Guo, H., Kontonikas, A., & Maio, P. (2020). Monetary Policy and Corporate Bond Returns. The Review of Asset Pricing Studies, 10(3), 441-489. https://doi.org/10.1093/rapstu/raaa005

Journal Article Type	Article
Acceptance Date	Mar 23, 2020
Online Publication Date	Jul 7, 2020
Publication Date	Oct 1, 2020
Deposit Date	Apr 16, 2020
Publicly Available Date	Jul 7, 2022
Journal	Review of Asset Pricing Studies
Print ISSN	2045-9920
Electronic ISSN	2045-9939
Publisher	Society for Financial Studies
Peer Reviewed	Peer Reviewed
Volume	10
Issue	3
Pages	441-489
DOI	https://doi.org/10.1093/rapstu/raaa005
Public URL	https://durham-repository.worktribe.com/output/1266258