Updating the Recession Risk and the Excess Bond Premium

The excess bond premium (EBP) is a measure of investor sentiment or risk appetite in the corporate bond market. A credit spread index can be decomposed into two components: a component that captures the systematic movements in default risk of individual firms and a residual component: the excess bond premium that represents variation in the average price of bearing exposure to US corporate credit risk, above and beyond the compensation for expected defaults. The EBP component of corporate bond credit spreads that is not directly attributable to expected default risk provides an effective measure of investor sentiment or risk appetite in the corporate bond market.

                                            [
  "920:00"
]
                                        

                                            {
  "fn": "Katherine Tom",
  "hasEmail": "mailto:ogda-data@frb.gov"
}
                                        

                                            [
  "Capital markets",
  "Data resource",
  "Financial economics",
  "Fixed income securities",
  "Sentiment"
]
                                        

                                            [
  "920:000"
]
                                        

                                            {
  "name": "Board of Governors of the Federal Reserve System"
}