The bond market is extremely important because it provides necessary financing support for both public and nonpublic sectors. The U.S. bond market is much larger than the equity market, and its sheer size makes understanding the factors that could influence bond pricing and bond valuation important. This chapter discusses the most important economic elements that could influence bond prices, including the Treasury yield curve, credit risk, liquidity risk, equity volatility, corporate governance, accounting quality, product market competition, creditor rights, and financial innovation. The content presented in this chapter has profound implications for today’s bond market and can help investors have a better understanding of bond valuation.
The impact of federal income tax rate cuts on the municipal bond market in the U.S.: A brief exploratory empirical note