An Empirical Investigation of New Bond Issue Yield Spreads, Default Risk and Split Ratings

Authors

  • Timothy S. Michael University of Houston Clarke-Lake, United States

DOI:

https://doi.org/10.32890/ijbf2009.6.1.8

Keywords:

Yield spreads, Split ratings, Bond index, Credit rating effect, Terms of debt issues

Abstract

This paper attempts to explain the yield spreads charged to new corporate debt issues by comparing the initial yields of a set of 3,287 securities issued over eleven years in the US. We use the measure of constant maturity Treasury rates on the day of issue against the Moody’s Aaa Corporate Bond index for the week prior to the issue, and the yield on a daily index of long-term Treasury securities on the issue date. The influences of credit ratings and disagreement between rating agencies as reflected in split ratings and the interactions between these characteristics are measured. The contributions of sinking fund provisions, call or refunding status, overseas issue and contractual security arrangements are evaluated separately. The results support the view that the higher yields are observed when ratings of agencies differ and that factors associated with the issues also are significant drivers of the yield difference.

 

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Published

17-03-2009

Issue

Vol. 6 No. 1 (2009): International Journal of Banking and Finance (IJBF) Vol. 6, No.1, 2009

Section

Articles

How to Cite

S. Michael, T. (2009). An Empirical Investigation of New Bond Issue Yield Spreads, Default Risk and Split Ratings. International Journal of Banking and Finance, 6(1), 141-160. https://doi.org/10.32890/ijbf2009.6.1.8

Research impact

Harvested 2026-09-07
2 citations, from OpenAlex — the highest of the sources checked

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Identifiers DOI 10.32890/ijbf2009.6.1.8 OpenAlex W1502388285