BOND YIELDS AND SPREADS DURING PRESIDENTIAL CAMPAIGNS AND ELECTIONS
Open Access
- Author:
- Chassard, Luke Arthur
- Area of Honors:
- Political Science
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Subhanan Mukherjee, Thesis Supervisor
Dr. Matthew Richard Golder, Thesis Honors Advisor - Keywords:
- Bonds
Spreads
Yields
Elections
Campaigns - Abstract:
- Government and corporate bonds historically have indicated market expectations about the future paths of interest rates and the credit strength of corporations. Policy changes in Washington affect the numbers on Wall Street, and understanding individuals’, companies’, and governments’ reactions to policy remains an important goal of economists and political scientists. Subsequently, much research has evaluated certain assets’, mainly stocks’, performance during administrations, elections, and campaigns. In regards to bonds, much analysis traces the movements of their yields during the previous terms of different presidents. Little research analyzes the fluctuation in bond yields during elections and campaigns. This paper seeks to determine if bond yields respond differently to Republican versus Democrat victories. Furthermore, this paper uses polling data to test whether the market’s anticipation of a winner influences the movement in bond yields. I contend market realization of a Republican winner, or the increased chances of a Republican winner, lowers the demand for government bonds and narrows the difference in yield rates between government and corporate bonds. I confirm that government bond yields rise and the spread between government and corporate bonds narrow when a Republican winner is announced in a close race. To conclude, I discuss the implications of my findings and suggest areas of future research.