Monetary Policy and Fragility in Corporate Bond Funds

2024-03-29 11:44:22

We document aggregate outflows from corporate bond funds days before and after the announcement of increases in the Federal Funds Target rate (FFTar). To rationalize this phenomenon, we build a model in which funds’ net-asset-values (NAVs) are stale and investors strategically redeem to profit from the mispricing when they learn about the increases of FFTar. Consistent with the model’s predictions, we find that stale NAVs and loose monetary policy environments weaken (strengthen) outflows sensitivity to increases in FFTar during illiquid (liquid) market conditions. Our results highlight when and how monetary policy could systematically exacerbate the fragility of corporate bond funds.

LINKS

PKU PKUSZ PHBS中文 UK campus SIQEF.PKU RMI.NUS Job.opening

CONTACT US

Peking University HSBC Business School(PHBS) University Town, Nanshan District Shenzhen 518055, P.R.China

0755-26031383

int.admission@phbs.pku.edu.cn

LINKS

CONTACT US

3D CAMPUS