Determinants of Spreads on High Yield Bonds Market

This paper is aimed to describe current state of Russian market of high-yield bonds and also to research the determinants, which impact G-spreads of bonds. Russian market for high-yield debt developed in the period of 2016 – 2018, which is connected to the fact that small and medium enterprises demand for more funding, what is complicated in terms of Russian market realities due to excess requirements from Russian banks which usually require huge amount of pledge and sureties. Volume of the market of corporate debt in Russia is expanding – it has rose by 10.5% from October 2020 to April 2021. Academic literature usually provides arguments for the following determinants of the spread on the bond market: macroeconomic determinants (inflation, spread between 10Y and 2Y Treasuries, exchange rates, current account, terms of trade, volatility of markets) and bond-specific determinants (credit rating, liquidity risk, volume of trade, callable option, industry, periodicity of coupon payments) The research paper considered 127 high-yield bonds which are traded on the Moscow Exchange for the October 2016 to April 2021 period. According to the results of the econometric study, it turned out that the signs of the coefficients practically coincide with almost all of the theoretical signs formed in the methodological part of this study. It also turned out that different indicators have different effects on the G-spread of bond spreads, if we divide the full sample by date before/after March 1, 2020, which reflects the coronavirus crisis, as well as data if we divide it by different industries.