February 2021

Monetary protection and the company bond market: How most fundamental is the Fed recordsdata extinguish?

Michael Smolyansky and Gustavo Suarez

Abstract:

Does expansionary financial protection drive up costs of unhealthy sources? Or, attain traders interpret financial protection easing as a signal that financial fundamentals are weaker than they previously believed, prompting riskier asset costs to descend? We take a look at these competing hypotheses all over the U.S. company bond market and win evidence strongly in desire of the 2d clarification—identified because the “Fed recordsdata extinguish”. Following an unanticipated financial protection tightening (easing), returns on company bonds sms lån på minuttet higher credit rating possibility outperform (underperform). We create that financial protection surprises are predominantly interpreted by market people as signaling recordsdata in regards to the express of the financial system.

DOI: https://doi.org/10.17016/FEDS.2021.010

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February 16, 2021

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