Title: Measuring corporate bond market dislocations
Authors: Nina Boyarchenko - Federal Reserve Bank of New York (United States) [presenting]
Abstract: The Corporate Bond Market Distress Index (CMDI) is proposed to quantify corporate bond market dislocations in real-time. The index takes a preponderance-of-metrics perspective to combine a broad set of measures of market functioning from primary and secondary markets but not driven by any one statistic. We document that the index correctly identifies periods of dislocations and predicts future realizations of commonly used measures of market distress, while the converse is not the case. Moreover, the CMDI is an economically and statistically significant predictor of future economic activity, even after controlling for standard predictors, including credit spreads.