The relation between treasury yields and corporate bond yield spreads：（美国国债收益率之间的关系和企业债券利差）.pdfVIP

THE JOURNAL OF FINANCE • VOL. LIII, NO. 6 • DECEMBER 1998 The Relation Between Treasury Yields and Corporate Bond Yield Spreads GREGORY R. DUFFEE* ABSTRACT Because the option to call a corporate bond should rise in value when bond yields fall, the relation between noncallable Treasury yields and spreads of corporate bond yields over Treasury yields should depend on the callability of the corporate bond. I confirm this hypothesis for investment-grade corporate bonds. Although yield spreads on both callable and noncallable corporate bonds fall when Treasury yields rise, this relation is much stronger for callable bonds. This result has im- portant implications for interpreting the behavior of yields on commonly used cor- porate bond indexes, which are composed primarily of callable bonds. COMMONLY USED INDEXES OF CORPORATE bond yields, such as those produced by Moody’s or Lehman Brothers, are constructed using both callable and non- callable bonds. Because the objective of those producing the indexes is to track the universe of corporate bonds, this methodology is sensible. Until the mid-1980s, few corporations issued noncallable bonds, hence an index de- signed to measure the yield on a typical corporate bond would have to be constructed primarily with callable bonds. However, any empirical analysis of these yields needs to recognize that the presence of the bonds’ call options affects their behavior in potentially important ways. Variations over time in yields on callable bonds will reflect, in part, variations in their option values. If, say, noncallable bond prices rise i.e., their yields fall, prices of callable bonds should not rise as much be- cause the values of their embedded short call options also rise