Modeling the green bond yield on bond offering

2020 ◽  
Vol 26 (12) ◽  
pp. 2858-2878
Author(s):  
M.I. Emets
Keyword(s):  
Linear Regression ◽  
Yield Curve ◽  
Bond Market ◽  
Third Party ◽  
Bond Pricing ◽  
Market Development ◽  
Fair Price ◽  
Lower Yield ◽  
Yield Curves ◽  
Bond Yield

Subject. The article addresses the green bond pricing as compared to bonds other than green ones. Objectives. The aims are to determine how the fact that a bond is identified as a green one, the issue amount, and the availability of third-party verification, influence the yield to maturity; to make recommendations on effective green bond pricing. Methods. The study employs econometric testing of hypotheses, using the multiple linear regression. The sample includes 318 green and 1695 conventional bonds. Results. Green bonds have a lower yield to maturity in comparison with conventional bonds. The yield to maturity of green bonds with third-party verification is lower, as contrasted with green bonds without verification. Conclusions. The next step in the green bond market development is creating a benchmark yield curve for sovereign green bonds, with parallel issuance of conventional, non-green bonds. The yield curve is crucial for effective bond pricing. Two yield curves, i.e. for green and non-green bonds, will enable investors to estimate the fair price on issuance, as well as to define, if there is a difference in pricing.

The Relation between Two Kinds of Par Yield Curves: Benchmark Par Yield Curve and Company Par Yield Curve

2012 ◽  
Vol 20 (3) ◽  
pp. 325-346
Author(s):  
Seung Hyun Oh
Keyword(s):  
Credit Risk ◽  
Credit Rating ◽  
Yield Curve ◽  
Bond Market ◽  
Corporate Bond ◽  
Spot Rate ◽  
Yield Curves ◽  
Transaction Data ◽  
Absolute Value ◽  
Bootstrapping Method

This study investigates the relation between two kinds of par yield curves estimated in Korean bond market: benchmark par yield curve and company par yield curve. The former is published as a benchmark for corporate bonds with a given credit rating and the latter is utilized for valuing a specific corporate bond. Spot rate curves are extracted from the par yield curves by applying bootstrapping method. The spreads between the two spot rate curves are analyzed for 7 years (2005~2012) of corporate bond transaction data. Six results are obtained from various sub-samples classified by credit rating and maturity. 1) Most of the sample means of the spreads are above zero. 2) Negative average spreads are found mainly from the sample of BBB rated bonds. 3) Average spreads from the sample with credit greater than or equal to A tend to positively related with credit risk. 4) Absolute value of the average spreads are positively related with credit risk. 5) The average spreads are increased rapidly after the year of 2009. 6) The proportion of sub-samples having negative average spreads are decreased as the average maturity of the sample is shortened.

Factors Affecting Bond Pricing and Valuation

2019 ◽  
pp. 437-452
Author(s):  
Mark Wu ◽  
Xiang Gao ◽  
Robert (Bob) Wieczorek
Keyword(s):  
Yield Curve ◽  
Market Competition ◽  
Bond Market ◽  
Bond Pricing ◽  
Accounting Quality ◽  
Factors Affecting ◽  
Bond Valuation ◽  
Quality Product ◽  
Sheer Size ◽  
The U.S

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.

scholarly journals How Important Are Inflation Expectations for the Nominal Yield Curve?

2020 ◽  
Author(s):  
Roberto Gomez-Cram ◽  
Amir Yaron
Keyword(s):  
Stochastic Volatility ◽  
Term Structure ◽  
Yield Curve ◽  
Bond Market ◽  
Inflation Expectations ◽  
Real Rate ◽  
Risk Premiums ◽  
Expected Inflation ◽  
Bond Yield ◽  
Bond Risk

Abstract Macrofinance term structure models rely too heavily on the volatility of expected inflation news as a source for variations in nominal bond yield shocks. We develop and estimate a model featuring inflation nonneutrality and preference shocks. The stochastic volatility of inflation and consumption govern bond risk premiums movements, whereas preference shocks generate fluctuations in real rates. The model accounts for key bond market features without resorting to an overly dominating expected inflation channel. The estimation shows that preference shocks are strongly negatively correlated with market distress factors and that real rate news is the dominant driver of nominal yield shocks.

scholarly journals Zero-Coupon, Forward, and Par Yield Curves for the Nigerian Bond Market

SAGE Open ◽  
2019 ◽  
Vol 9 (4) ◽  
pp. 215824401988514
Author(s):  
Victor Curtis Lartey ◽  
Yao Li ◽  
Hannah Darkoa Lartey ◽  
Eric Kofi Boadi
Keyword(s):  
Penalty Method ◽  
Yield Curve ◽  
Bond Market ◽  
Secondary Market ◽  
Sub Saharan Africa ◽  
Fixed Income ◽  
African Countries ◽  
Yield Curves ◽  
Variable Roughness ◽  
Roughness Penalty

The Nigerian bond market is currently one of the most liquid in sub-Saharan Africa. Many African countries regard it as a model from which to learn and based on which to develop their respective bond markets. The developments achieved in the Nigerian bond market are of particular interest to both investors and fixed income analysts—both domestic and international. One of the important tools required for fixed income analysis, pricing, and trading is the yield curve. To the best of our knowledge, even though the Nigerian bond market has a secondary market yield curve, the yield curve is a yield-to-maturity curve, and not zero-coupon yield curve. The purpose of this study is to model the zero-coupon, par, and forward yield curves for the Nigerian bond market. We use various methods such as the piecewise cubic Hermite method, the piecewise cubic spline method (with not-a-knot end condition), the Nelson–Siegel–Svensson method, and the variable roughness penalty method. Data are obtained from the FMDQ OTC website. The results show that the piecewise cubic Hermite method is very suitable for producing the Nigerian par and zero-coupon yield curves. Our best recommended method for producing the Nigerian zero-coupon yield curve is therefore the piecewise cubic Hermite method, followed by the Nelson–Siegel–Svensson method. For the forward yield curve, the results show that the best method is the Nelson–Siegel–Svensson method, followed by the variable roughness penalty method.

scholarly journals Impact of Bond Market Development on the Growth of the Nigerian Economy

2021 ◽  
Vol 21 (1) ◽  
pp. 60-75
Author(s):  
Michael O. Oke ◽  
Oluwabunmi Dada ◽  
Nelson O. Aremo
Keyword(s):  
Financial Institution ◽  
Negative Relationship ◽  
Bond Market ◽  
Corporate Bond ◽  
Market Development ◽  
Bond Markets ◽  
Government Bond ◽  
Bond Yield ◽  
Traditional Function ◽  
The Impact

Abstract Research background: The traditional function ascribed to a modern financial institution is to mobilize resources among the two units (surplus and deficit) of the economy. This can be achieved when financial institutions wake up to this responsibility and act as the pillar upon which other institutions can rely on. Purpose: This study examined the impact of bond market development on the growth of the Nigerian economy from 1986–2018. Research methodology: Data were analysed using the co-integration bounds test approach while the robustness of the estimates was also checked. Results: Government bond exhibited an insignificant positive relationship; corporate bond and value of bond traded were positive and statistically significant (prob. <0.05) while bond yield indicated a negative relationship with the growth of the Nigerian economy. Novelty: The study found that corporate bond and the value of bond traded were the major variables that increased the depth of bond market development in Nigeria. Therefore, policymakers in Nigeria should encourage the issuance of more corporate bonds to further enhance the efficiency of bond markets development.

scholarly journals Facts, Factors, and Questions

2013 ◽  
Author(s):  
Francis X. Diebold ◽  
Glenn D. Rudebusch
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Yield Curve ◽  
Curve Shape ◽  
Bond Yields ◽  
Yield Curves ◽  
Bond Yield ◽  
Macroeconomic Fundamentals ◽  
Bank Behavior ◽  
Theoretical Considerations

This chapter introduces some important conceptual, descriptive, and theoretical considerations regarding nominal government bond yield curves. Conceptually, just what is it that are we trying to measure? How can we best understand many bond yields at many maturities over many years? Descriptively, how do yield curves tend to behave? Can we obtain simple yet accurate dynamic characterizations and forecasts? Theoretically, what governs and restricts yield curve shape and evolution? Can we relate yield curves to macroeconomic fundamentals and central bank behavior? The discussions cover three interest rate curves, zero-coupon yields, yield curve facts, yield curve factors, and yield curve questions.

scholarly journals The Japan Municipal Bond Yield Curve: 2002 to the Present

2016 ◽  
Vol 8 (6) ◽  
pp. 118 ◽  
Author(s):  
Takahiro Hattori ◽  
Hiroki Miyake
Keyword(s):  
Current Literature ◽  
Yield Curve ◽  
Bond Market ◽  
Municipal Bonds ◽  
Municipal Bond ◽  
Spline Method ◽  
Bond Yield ◽  
Long Run ◽  
Daily Data ◽  
First Time

<p align="left">The aim of this paper is to present the par yield curve for Japan’s Municipal Bonds, by examining daily data from 2002 to the present. Moreover, this paper contributes to current literature by making available for the first time additional long-run market data on Japan’s Municipal Bonds, and thereby enabling economists and practitioners to analyze the large municipal bond market of Japan in detail. We also investigate the fit of the well-known parametric and spline methods in their standard measures, and are able to show that the spline method does, in fact, fit well as in previous studies. In keeping with our aim to make these data more widely available, we posted the data on the following website and expect to update this regularly: http://www.mcnnns77.net.</p>

scholarly journals Foreign Investments in the Chinese Bond Markets

2020 ◽  
Vol 6 ◽  
pp. 1
Author(s):  
Kerry Liu ◽  
Keyword(s):  
Yield Curve ◽  
Bond Market ◽  
Bond Markets ◽  
Yield Spread ◽  
Foreign Investments ◽  
Foreign Investors ◽  
Academic Literature ◽  
Specific Effects ◽  
Bond Yield ◽  
Strategic Factors

The Chinese bond market is the second largest in the world. However, studies on Chinese bond markets are very few, and especially there are no studies on foreign investments in the Chinese bond markets. This study fills the gap in the academic literature by focusing on foreign investments in the Chinese bond markets. By using the least-squares model with breaks, this study finds that although, in theory, the factors of exchange rate, yield spread, and yield correlation should play a significant role in attracting foreign investors to invest in the Chinese bond markets, the specific effects depend on the stage of the Chinese bond markets’ open-up. Initially, the main foreign investors are central banks and similar institutions, and they primarily consider more strategic factors than pure return or risk factors. As more institutional investors have entered the Chinese bond markets, the considerations of enhancing risks and/or reducing risks become more significant. The increasing foreign investments will be beneficial to the Chinese bond markets such as more issuance of longer-dated bonds, thus helping China to establish its RMB bond yield curve, and improving the market efficiency. The Chinese authorities should launch more policy initiatives to attract foreign investors.

Risk and Return of Retail Sukuk and Retail Bond in Indonesia Period 2008-2017 (Comparative Study)

2020 ◽  
Vol 15 (1) ◽  
Author(s):  
Rahma Yudi Astuti ◽  
Asad Arsya Brilliant Fani
Keyword(s):  
Standard Deviation ◽  
Comparative Study ◽  
Stock Exchange ◽  
Secondary Data ◽  
Bond Market ◽  
Bond Pricing ◽  
Risk And Return ◽  
Underlying Asset ◽  
The Real ◽  
The World

Sukuk and Bonds has differences and similarities. Fundamental differences between sukuk and bonds are first, underlying asset in every sukuk issuance, concept of profit loss sharing and the use of Islamic contracts. Whereas conducted research in practice of differences between sukuk and bonds are still an on-going discussion. This study aims to add the evidence in the discussion regarding whether there is differences between sukuk and bonds in the world of practice, provide investment preferences as well as educating investors in choosing sukuk or bonds as a sustainable and smooth instrument. The method used is Mann Whitney U-Test to test whether there is a different between yield to maturity (return) and standard deviation (risk) of both instruments. Using secondary data of Retail Sukuk (SR) and Retail Bonds (ORI) period 2008-2017 obtained from Indonesia Stock Exchange, Indonesia Bond Market Directory and Indonesia Bond Pricing Agency. The result shows that there is no significance difference of retail sukuk return and risk with retail bonds in Indonesia. Besides retail bonds are show higher return than retail sukuk because of higher coupon and longest mature date. While, retail sukuk is more stable rather than bonds as it backed up by the real underlying asset. Keywords: Retail Sukuk (SR), Retail Bonds (ORI), Yield to Maturity

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