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Marginal vs. Average Mortgage Rates
Mortgage rates have risen sharply, but the impact on the typical borrower can be better gauged if one considers the average rate rather than the current rate.
Russia’s Invasion of Ukraine and Its Impact on Stock Prices
Since the two countries are global suppliers of raw materials, Russia’s invasion of Ukraine triggered a commodity price shock. Which stocks were most sensitive to it?
Excess Retirements Continue despite Ebbing COVID-19 Pandemic
COVID-19 spurred a wave of retirements. Though the effects of the pandemic have subsided, the number of retirees remains well above what would have been expected from socioeconomic trends.
Working Paper
An Empirical Analysis of the Cost of Borrowing
We examine borrowing costs for firms using a security-level database with bank loans and corporate bonds issued by U.S. companies. We find significant within-firm dispersion in borrowing rates, even after controlling for security and firm observable characteristics. Obtaining a bank loan is 132 basis points cheaper than issuing a bond, after accounting for observable factors. Changes in borrowing costs have persistent negative impacts on firm-level outcomes, such as investment and borrowing, and these effects vary across sectors. These findings contribute to our understanding of borrowing ...
The Many Interest Rates in 2022
The one-year Treasury rate and the five-year, five-year forward rate on Treasuries told different stories in 2022, depending on whether one looked at nominal rates or real rates.
Working Paper
An Empirical Analysis of the Cost of Borrowing
We empirically study firm financing costs using a comprehensive dataset of corporate bonds and bank loans. We construct a measure of the cost of financing, the ExcessDebt Premium, which controls for observable debt characteristics. We document two key findings: first, bank loans are about 97 basis points cheaper than corporate bonds when controlling for observable characteristics. Second, there is significant dispersion in borrowing costs, even within the same firm and quarter. The analysis reveals that this within firm variation persists after accounting for instrument type, maturity, ...
Journal Article
Assessing the Costs of Rolling Over Government Debt
The US government has $21.4 trillion in outstanding Treasury debt in bills, notes, and bonds. Given the federal funds rate is up 4-5% over the past year, how expensive will it be to roll over maturing Treasury debt at these higher rates?
Retirements, Net Worth, and the Fall and Rise of Labor Force Participation
New research suggests that declining asset values in 2022 may have prompted older workers to return to the labor force.
The Fed’s Remittances to the Treasury: Explaining the 'Deferred Asset'
The Federal Reserve typically generates excess earnings, which it remits to the U.S. Treasury. But what happens when the Fed’s costs exceed its income? A blog post explains.
Journal Article
Commercial Real Estate: Where Are the Financial Risks?
Large banks, with assets over $100 billion, tend to have significantly lower exposure to commercial real estate market risks than the average commercial bank in the US.