RT Journal Article
SR Electronic
T1 Credit Rating and Liquidity in the US Corporate Bond Market
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 46
OP 59
DO 10.3905/jfi.2019.28.4.046
VO 28
IS 4
A1 Antonio Díaz
A1 Ana Escribano
YR 2019
UL https://pm-research.com/content/28/4/46.abstract
AB This article examines the relationship, commonly assumed by the literature, between credit rating and liquidity. Analyzing sixteen proxies of (il)liquidity encompassed in five dimensions of liquidity from transaction data, the authors observe that credit ratings can be grouped into four blocks based on their liquidity when working with bond-level data. The blocks are AAA/AA and A/BBB for investment-grade bonds, and BB/B and “CCC or lower” for speculative-grade bonds. However, when working with rating-level data, significant differences in liquidity appear between all rating categories. These liquidity differences are not homogeneous when a distinction is made between dimensions of liquidity.TOPICS: Fixed income and structured finance, risk management, information providers/credit ratings