Covenant Prices of US Corporate Bonds

Activity: Talk or presentationScience to science


Covenant prices
This paper provides a novel approach to empirically determine prices of bond covenants based on transaction data for the US corporate bond market. Thereby, we are the first to measure price effects over the whole lifetime of bond contracts. We find that covenant prices vary significantly over time and are associated with changes in market-wide credit risk, volatility, and macroeconomic variables. During and after the financial crisis, this relationship is particularly pronounced leading to significantly higher covenant prices in the range of 5% of the overall bond yields. Apart from these time-series dynamics, there is also significant variation across bond and firm characteristics. In particular, covenant prices increase with interest rate, credit, and liquidity risk and are higher for firms that have more growth options, more tangible assets, and are smaller. Furthermore, we document a positive correlation between the prices of covenants and their subsequent inclusion rates.
Period30 Sept 2022
Event title28th Annual Meeting of the German Finance Association
Event typeConference
LocationMarburg, GermanyShow on map
Degree of RecognitionInternational


  • covenants
  • corporate bonds
  • debt pricing