The policy rate cut was accompanied with a 155bp drop in 3 year PIB maturity spread to 95bp.
FRIDAY NOV 21 2014 - BANKS: MATURITY SPREAD SHRINKS; PREFER MCB
- The recent policy rate cut of 50bp has accompanied a steep fall in the abnormally high maturity spread in the economy with a 155bp drop in 3 year PIB maturity spread to a rational 95bp.
In addition, the 'price' of a CDS is normally quoted as a constant maturity spread, whereas bond spreads are calculated by subtracting an unknown risk-free interest rate from the bond yield and are therefore not directly comparable if the maturities of the underlying bonds differ (Alexander, Kaeck 2008).
We collect the CDS constant maturity spreads on a daily basis at the end of each year (averaged for the last 10 trading days) over the period 2002- 2009.