RT Journal Article SR Electronic T1 Interest Rates and Credit Spread Dynamics JF The Journal of Derivatives FD Institutional Investor Journals SP 25 OP 39 DO 10.3905/jod.2015.23.1.025 VO 23 IS 1 A1 Robert Neal A1 Douglas Rolph A1 Brice Dupoyet A1 Xiaoquan Jiang YR 2015 UL https://pm-research.com/content/23/1/25.abstract AB Corporate credit spreads narrow when the general level of rates is high, but the effect appears to go well beyond what can be justified by firm-specific and marketwide credit conditions. In this article, the authors argue that the phenomenon is largely a statistical artifact caused by failure to take account of cointegration between Treasury and corporate yields. Using a generalized impulse-response approach and conditioning on the current level of rates, they find that large shocks to the Treasury curve do not produce significant changes in credit spreads, either contemporaneously or out to three years in the future. Among other things, this empirical result calls into question assumptions commonly made in theoretical models of corporate credit risk.TOPICS: Fixed income and structured finance, credit risk management