Dynamic Relationship between Macroeconomic Determinants and Corporate Bonds Performance: The Case of India

Abstract

Corporate bonds can serve as an important alternative to the more expensive sources of financing and the market requires more exploration for its development. For ensuring the steady growth in this sector, the government can adopt several macroeconomic policy measures which can accelerate the market's progress. The study has been undertaken to analyse the relationship between selected macroeconomic variables and Indian corporate bond market performance. The study used multiple linear regression and Granger causality test to analyse the relationship between the variables. The results found no impact of macro-economic variables on corporate bond performance. Further, study found no causality between macro-economic variables on corporate bond performance. Whereas correlation results clearly shows the bond returns has low degree of negative correlation with Nifty returns and GDP growth rate. The study suggests bond market participants to consider stock market performance before tanking investment decisions.