Hi Lindsay,
When the question asked: "outline possible causes of the widening of corporate bond credit spread". I am wondering how much in details I need to provide? and wonder if my answers below would be valid?
- The counterparty was downgraded. For example, the issuer of corporate bonds was downgraded from AA- to A.
- The bond issuer is facing with liquidity issue which could cause the spread widening.
- Maybe due to the recent economic downturn that increase the volatility of a particular sector (eg. banking sector), thus increase the probability of default.
Thanks.
Last edited: Sep 13, 2017