Risk premiums on corporate bonds are usually anti cyclical that is, they decrease during business cycle expans?
April 28, 2009 by How Savings Bonds Work
Filed under More Bonds Answers
Can you answer Jeet’s question about Bonds?:
Risk premiums on corporate bonds are usually anti cyclical that is, they decrease during business cycle expansions and increase during recessions.
High Yield Corporate Bonds
Risk premiums on corporate bonds are usually anti cyclical that is, they decrease during business cycle expansions and increase during recessions.
High Yield Corporate Bonds
Bonds Feedback: True
Bonds Feedback: Yes. As the economy enters a recession, expected default rates will be higher and credit spreads widen. i.e. risk premium on corporate bonds will increase.
During boom times, companies are expected to do well and expected default rates will be lower. credit spreads will narrow.