Abstract
Using the staggered implementation of the Trade Reporting and Compliance Engine (TRACE) as a natural experiment, we show that bonds issued in a transparent environment receive higher prices (or equivalently pay lower yield spreads to benchmark US treasury bonds) relative to control bonds issued in the opaque, pre-TRACE environment. The yield spread on a typical pre-TRACE issuance of 132bps falls by 12bps following implementation of TRACE. We do not detect a significant effect on underpricing or fees and expenses paid in the issuing process. The main driver of the reduction in the cost of capital for bond issuers is the mitigation of information asymmetry rather than improved liquidity in the secondary market.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
