The Term Structure of the Excess Bond Premium: Measures and Implications
In this article, we construct daily aggregate as well as short-, medium-, and long-term "excess bond premium" (EBP) measures using a widely available corporate bond database (known as "TRACE"). The novel EBP measures we construct provide an important gauge of strains in the financial sector at different horizons. We find that the short-term EBP measure increased more dramatically at the peaks of the COVID-19 pandemic and the 2007–09 global financial crisis, but the pattern was reversed around the interest rate liftoff at the end of 2015.
- The authors find that the short-term EBP measure increased more dramatically at the peaks of the COVID-19 pandemic and the 2007–09 global financial crisis.
- The pattern was reversed around the interest rate liftoff in the end of 2015.
Center affiliation: Center for Quantitative Economic Research
JEL classification: E44, E58, G12
Key words: excess bond premium, term structure, TRACE, COVID-19
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