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There is no agreement on a uniform "corporate spread" to serve as a benchmark.
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Corporate spreads have widened over the same period, and some issuance of corporate bonds has been postponed, especially by speculative-grade issuers.
JPMorgan Chase's debt-market stress tests foresaw a 40% increase in corporate spreads, but high-yield spreads in 2007-09 increased many times over.
The summer camps withered, and at the same time, local dairy farmers found they couldn't compete with huge corporate spreads.
During the past year, corporate spreads to Treasurys have moved in lockstep with the Treasury yield curve.
With corporate spreads at such generous levels, why would anyone want to own Treasurys?
In fact, the supply-and-demand explanation for wider corporate spreads is dead wrong.
Merton's model, though, captures the sudden blowup of corporate spreads when stock prices fall below a given threshold.
Corporate spreads improved along with the economy, as did profits, but stock prices stagnated, so price-to-earnings ratios slid.
We see this uncertainty priced into the implied volatility of equity options, and the same uncertainty affects corporate spreads.
Single-A-rated long corporate spreads have come in from 195 in mid -October to 153, close to the mid-August level of 133.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com