Finance Seminar（2015-31）

Topic:How Do You Sell a $1 Billion Corporate Bond? An Investigation of Liquidity and Price Pressure Effects

Speaker:Jean Helwege, UC – Riverside

Time:Thursday, 22 October, 10:00-11:30

Location:Room K01, Guanghua Hotel

Abstract:Larger bond offerings provide investors with greater liquidity, but they can be difficult to place. In this paper we consider the beneficial liquidity aspects of very large bond deals and the difficulties that arise from price pressure. We find that mega-bonds have unusually high liquidity, as measured by trading volume and frequency, but less so when measured by price impact. Despite their greater liquidity, very large bonds suffer from greater underpricing and have higher yields. Thus, firms that want to raise a billion dollars might find it helpful to split the bond offering across time or by maturity.