Bio

Jun Yang is a Senior Economist in the Financial Market Department at the Bank of Canada. His primary research interests center on the link between non-financial firms’ capital structure decisions and asset prices. Specific topic include credit risk and debt maturity choice. Jun Yang receive his PhD in economics from University of Toronto.

Research Field(s): Asset Pricing Corporate Finance Financial Economics

Staff analytical notes

Using Exchange-Traded Funds to Measure Liquidity in the Canadian Corporate Bond Market

Staff Analytical Note 2019-25 Rohan Arora, Guillaume Ouellet Leblanc, Jabir Sandhu, Jun Yang
We introduce a new proxy for measuring corporate bond liquidity, using the price of exchange-traded funds (ETFs) that hold corporate bonds. It measures the average liquidity across 900 corporate bonds every day, many more than other proxies used in previous Bank of Canada analysis. The new proxy nonetheless paints a very similar picture of liquidity conditions and confirms the previous findings: the liquidity of bonds has generally improved since 2010.
Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G12, G14

The Cost of the Government Bond Buyback and Switch Programs in Canada

Staff Analytical Note 2018-41 Bo Young Chang, Jun Yang, Parker Liu
This note examines the costs of the Government of Canada bond buyback and switch programs between 1998 and 2016. Our analysis indicates that the auction design of the buyback program was effective in retiring government debt with minimal costs resulting from bid shading in auctions and price impact.
Content Type(s): Staff research, Staff analytical notes Topic(s): Debt management JEL Code(s): D, D4, D44

Have Liquidity and Trading Activity in the Canadian Corporate Bond Market Deteriorated?

Staff Analytical Note 2018-31 Chen Fan, Sermin Gungor, Guillaume Nolin, Jun Yang
Since 2010, the liquidity of corporate bonds has improved on average, while their trading activity has remained stable. We find that the liquidity and trading activity of riskier bonds or bonds issued by firms in different sectors have been stable. However, the liquidity and trading activity of bonds issued by banks have improved. We observe short-lived episodes of deterioration in liquidity and trading activity.
Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G12, G14

Have Liquidity and Trading Activity in the Canadian Provincial Bond Market Deteriorated?

Staff Analytical Note 2018-30 Chen Fan, Sermin Gungor, Guillaume Nolin, Jun Yang
In recent years, the liquidity in the secondary market for Canadian provincial bonds was a concern for many market participants. We find that a proxy for the bid-ask spread has deteriorated modestly since 2010. However, a proxy for price impact as well as measures of trade size, the number of trades and turnover have been stable or improved since 2010. This holds for bonds issued by different provinces and for bonds of different ages and sizes. Alberta bonds provide an interesting case study: After the fall in oil prices in 2014–15, the province increased its borrowing in the bond market and its credit rating was downgraded. Yet trading activity for Alberta bonds increased significantly. Overall, we interpret the evidence as a sign of resilience in the provincial bond market.
Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G12, G14

Has Liquidity in Canadian Government Bond Markets Deteriorated?

Staff Analytical Note 2017-10 Sermin Gungor, Jun Yang

This note presents measures of liquidity used by the Bank of Canada to monitor market conditions and discusses recent trends in Government of Canada (GoC) fixed-income market liquidity. Our results indicate that the Bank’s measures have improved since the financial crisis. Furthermore, GoC market liquidity deteriorated following several stressful events: the euro crisis in 2011, the taper tantrum in 2013 and the oil price shock in 2015. In all three cases, the deterioration remained within historical norms and liquidity returned to normal levels afterwards.
Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G12, G14

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Staff working papers

Corporate Governance, Product Market Competition and Debt Financing

Staff Working Paper 2014-5 Teodora Paligorova, Jun Yang
This paper examines the impact of product market competition and corporate governance on the cost of debt financing and the use of bond covenants. We find that more anti-takeover provisions are associated with a lower cost of debt only in competitive industries.
Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): G, G1, G12, G3, G34

Systematic Risk, Debt Maturity and the Term Structure of Credit Spreads

Staff Working Paper 2012-27 Hui Chen, Yu Xu, Jun Yang
We build a dynamic capital structure model to study the link between systematic risk exposure and debt maturity, as well as their joint impact on the term structure of credit spreads. Our model allows for time variation and lumpiness in the maturity structure. Relative to short-term debt, long-term debt is less prone to rollover risks, but its illiquidity raises the costs of financing.
Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Debt management JEL Code(s): G, G3, G32, G33

Idiosyncratic Coskewness and Equity Return Anomalies

Staff Working Paper 2010-11 Fousseni Chabi-Yo, Jun Yang
In this paper, we show that in a model where investors have heterogeneous preferences, the expected return of risky assets depends on the idiosyncratic coskewness beta, which measures the co-movement of the individual stock variance and the market return.
Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets JEL Code(s): G, G1, G11, G12, G14, G3, G33

A No-Arbitrage Analysis of Macroeconomic Determinants of Term Structures and the Exchange Rate

Staff Working Paper 2007-21 Fousseni Chabi-Yo, Jun Yang
We study the joint dynamics of macroeconomic variables, bond yields, and the exchange rate in an empirical two-country New-Keynesian model complemented with a no-arbitrage term structure model. With Canadian and US data, we are able to study the impact of macroeconomic shocks from both countries on their yield curves and the exchange rate.
Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Econometric and statistical methods, Exchange rates, Financial markets, Interest rates JEL Code(s): E, E1, E12, E4, E43, F, F4, F41, G, G1, G12, G15

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Bank publications

Bank of Canada Review articles

September 11, 2009

Understanding Corporate Bond Spreads Using Credit Default Swaps

Bank of Canada Review - Autumn 2009 Alejandro García, Jun Yang
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.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Econometric and statistical methods, Financial markets, Financial stability

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