September 11, 2009
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September 11, 2009
Understanding Corporate Bond Spreads Using Credit Default Swaps
Corporate bond spreads worldwide have widened markedly since the beginning of the credit crisis in 2007. This article examines default and liquidity risk–the main components of the corporate bond spread–for Canadian firms that issue bonds in the U.S. market, focusing in particular on their evolution during the credit crisis. They find that, during this period, the liquidity component increased more for speculative-grade bonds than it did for investment-grade bonds, consistent with a "flight-to-quality" phenomenon. An important implication of their results for policy-makers seeking to address problems in credit markets is that the liquidity risk in corporate spreads for investment and speculative bonds behaves differently than the default risk, especially during crisis episodes. -
September 11, 2009
Agency Conflicts in the Process of Securitization
Recent evidence finds a positive association between the prevalence of loans of inferior quality and the growth in securitized products. Some attribute this development to the lack of incentives for originators to screen and monitor the performance of securitized loans; others stress that certain factors, such as balance-sheet management, also contributed to the problem, making it difficult to pin down the reason for the proliferation of such loans during the period of high securitization growth. The author reviews the conflicts of interest between participants in the securitization process that contributed to the ongoing financial turmoil and highlights the most recent policy measures and potential solutions for ameliorating these agency issues. -
September 11, 2009
Bank of Canada Review - Autumn 2009
Bank of Canada liquidity actions in response to the financial market turmoil; understanding corporate bond spreads using credit default swaps; review of the conflicts of interest between participants in the securitization process highlighting the most recent policy measures and potential solutions for ameliorating these agency issues. -
September 10, 2009
Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010
The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. -
September 10, 2009
Results for the 10 September 2009 Term Loan Facility
The results of today's TLF operation. -
September 9, 2009
Results of the 9 September 2009 Term PRA Transaction for Private Sector Instruments
The results of today's term PRA operations. -
September 8, 2009
Results of the 8 September 2009 Term PRA Transaction
The results of today's term PRA operations. -
September 4, 2009
Bank of Canada Announces Details of its Term PRA for Private Sector Instruments Operation
In accordance with the schedule of term purchase and resale agreement (PRA) auctions for private sector instruments announced on 21 July. -
September 4, 2009
Bank of Canada Announces Details of its Term Loan Facility Operation
In accordance with the schedule of Term Loan Facility (TLF) auctions announced on 21 July.