We would like to thank the editor, Jayant Kale, and the reviewer, Gergana Jostova, for their comments and suggestions. All remaining errors are ours. This work is supported by the ESRC grant, RES-000-22-0187.
THE SLOPE OF THE TERM STRUCTURE OF CREDIT SPREADS: AN EMPIRICAL INVESTIGATION
Article first published online: 22 JUN 2007
Journal of Financial Research
Volume 30, Issue 2, pages 237–257, Summer 2007
How to Cite
Bedendo, M., Cathcart, L. and El-Jahel, L. (2007), THE SLOPE OF THE TERM STRUCTURE OF CREDIT SPREADS: AN EMPIRICAL INVESTIGATION. Journal of Financial Research, 30: 237–257. doi: 10.1111/j.1475-6803.2007.00212.x
- Issue published online: 22 JUN 2007
- Article first published online: 22 JUN 2007
In this article we analyze the slope of the term structure of credit spreads. We investigate the explanatory role of interest rate, market, and idiosyncratic equity variables that the recent empirical literature highlights as important determinants of credit spread levels. This study extends the analysis and assesses its effect on credit slopes for a sample of corporate bonds. We find that these factors affect credit spreads at short and long maturities in a significantly different way. A closer inspection of the credit spread slope also reveals that it is a useful indicator of the direction of changes in future short-term credit spreads. This evidence has important implications for the trading and risk management of portfolios of bonds with different maturities.