Analysis of Credit Spread in Japan’s Corporate Bond Market

By then, most of the restrictions on corporate bond issues had already been relaxed. For example, in 1990, eligibility criteria …

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Analysis of Credit Spread in Japan\’s Corporate Bond Market
BIS Papers No 51132. It is supposed that the accumulationof government bonds reduces an investor\’s ability to purchase other bonds. 721. On the other hand, we could not prove the existence of the relativesignificance of credit risk to duration risk or the crowding-out effect that are monitored by marketparticipants in their dealing. This situation changed in 1997, when a severe financial environment surrounding Japanese financialinstitutions emerged. Supply and demand factors in the corporate bond market also contributed to the narrowing. 3Market liquidityA large, efficient and liquid secondary bond market is highly desirable from the perspective of issuers,investors and dealers that trade and sell corporate bonds. As mentioned, in Japan investors incorporate bonds do not effect sufficient credit analysis, and the market has not really imposed a creditspread which is properly linked to the credit of the firm issuing bonds. In the UnitedStates, investors bear credit risk and are paid a premium coupon for taking on such an obligation.

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