The Time-Series Behaviour of Credit Spreads on Yen Eurobonds

Abstract

Straight fixed rate Yen denomitated Eurobonds represent the largest market segment after U.S. dollar denominated issues. The objective of this paper is to investigate the time series behaviour and the efficiency of the markets for credit spreads between different risk and maturity classes of Yen denominated Eurobonds. We find that the credit spreads were time-varying and the return series were inefficient though those results may have been due to differences in liquidity between the different credit classes and maturities of bonds. The mplications of these results for credit spread derivatives is examined.