The paper uses a reduced-form vector autoregressive framework to study the effects of quantitative easing and operation ‘‘twist’’, as well as a conventional monetary expansion, on corporate bond yields and spreads. We construct ratingand maturity-based weekly bond portfolios using TRACE and simulate monetary policies as shocks to the Treasury yield curve. We find that none of the policies can p...

Although the results are based on a small sample • of Canadian fi rms, they are consistent with recent research on how liquidity risk is priced in corporate bond markets. Since the beginning of the credit crisis in mid2007, corporate spreads worldwide widened markedly. In Canada, the aggregate spread for investment-grade fi rms reached a maximum of 401 basis points (bps) in January and March of...