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The relation between treasury yields and corporate bond yield spreads in Australia: Evidence from VARs

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  • Österholm, Pär

Abstract

In this paper we investigate the relation between treasury yields and corporate bond yield spreads. This is done by estimating VAR models on monthly Australian data from January 2005 to March 2017. Our results suggest -in line with mainstream theoretical models- that a higher risk free rate compresses the corporate bond yield spread. We also find that a higher corporate bond yield spread lowers the three-month treasury bill rate.

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  • Österholm, Pär, 2018. "The relation between treasury yields and corporate bond yield spreads in Australia: Evidence from VARs," Finance Research Letters, Elsevier, vol. 24(C), pages 186-192.
    • Handle: RePEc:eee:finlet:v:24:y:2018:i:c:p:186-192
    DOI: 10.1016/j.frl.2017.09.009
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    Cited by:

    1. Karlsson, Sune & Österholm, Pär, 2019. "Volatilities, drifts and the relation between treasury yields and the corporate bond yield spread in australia," Finance Research Letters, Elsevier, vol. 30(C), pages 378-384.
    2. Li, Xiao-Lin & Li, Xin & Si, Deng-Kui, 2020. "Asymmetric determinants of corporate bond credit spreads in China: Evidence from a nonlinear ARDL model," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).

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    More about this item

    Keywords

    Vector autoregressions ; Credit spreads;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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