Historical and Current Corporate Bonds Risk Premium

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
mrwheelerdealer
Posts: 89
Joined: Wed Apr 09, 2014 7:35 pm

Historical and Current Corporate Bonds Risk Premium

Post by mrwheelerdealer » Sun Jun 18, 2017 3:32 pm

Hello Bogleheads,

I have been looking all over for reliable data about the historical average risk premium that corporate bonds have experienced over the years. I have not had any success. Specifically, I wanted to compare the current Risk Premium (difference in yield between, say greater than and including Baa Bonds and Treasury bonds which combines the Default Premium, Liquidity Premium, etc.) and compare it to what the historical Risk Premium has been. Would anyone be able to guide me to some reliable data?

Many thanks,

mrwheelerdealer
The Biggest Risk is to not take one

User avatar
triceratop
Moderator
Posts: 3464
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: Historical and Current Corporate Bonds Risk Premium

Post by triceratop » Sun Jun 18, 2017 3:47 pm

Corporate bond excess returns, aka `default' premia, have been discussed at length recently on Bogleheads. I recommend this thread for a good overview of where the understanding and discussion currently stand: viewtopic.php?t=209748
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

rrppve
Posts: 796
Joined: Sun Aug 12, 2012 12:35 am

Re: Historical and Current Corporate Bonds Risk Premium

Post by rrppve » Sun Jun 18, 2017 4:07 pm

I believe this data is available in the Ibbotson yearbooks. Their corporate bond index may cover only investment grade.
Current spreads for corporates are low. Thus, the current market is providing lower returns for taking on the additional credit risk.

lack_ey
Posts: 5627
Joined: Wed Nov 19, 2014 11:55 pm

Re: Historical and Current Corporate Bonds Risk Premium

Post by lack_ey » Sun Jun 18, 2017 4:23 pm

Publicly available (for free) there's the data in the FRED database starting 1996 for various option-adjusted corporate spreads:
https://fred.stlouisfed.org/search?st=o ... ted+spread

Checking yields alone from different indexes that are not duration-matched may be problematic. You can look for older data on say corporate bond yields but the nature of the corporate bond market has shifted over time, so be careful.

Ibbotson and Barclays are probably the two big data sources for this. Ibbotson's data goes back the furthest, and Barclays has info on duration, OAS, yields, etc.

Some places you may find return but not yield, or vice versa.

mrwheelerdealer
Posts: 89
Joined: Wed Apr 09, 2014 7:35 pm

Re: Historical and Current Corporate Bonds Risk Premium

Post by mrwheelerdealer » Sun Jun 18, 2017 5:47 pm

Thank you for the links. I'll will do my readerch and post back with any insights. Thank you all
The Biggest Risk is to not take one

Post Reply