Effects of COVID on corporate bond yields of specific sectors in the U.S. and Europe

Abstract

COVID- 19 has had a debilitating impact on all major economies of the world. It has crippled sectors that are normally immune to the economic cycle. Tackling such a “once in a lifetime pandemic” requires careful and calculated decisions on the part of key decision-makers to mitigate the impact of the crisis on the masses. In this project, we assess the impact of monetary policies on corporate yields/ spreads in the United States of America and the European Union. We compare the volatility of bond yields with respect to the treasury bond yields. Additionally, we analyze the effects of the pandemic on the major sectors and how specific policies have helped inject life in ailing sectors. We have selected aviation, healthcare, and technology as the sectors for our analysis. We chose the aforementioned sectors because the pandemic has had varying repercussions on them. In this report, we examine the corporate bond yields for the three sectors in U.S. and Europe (Comparing them to treasuries); we further try to explain differences between the trends observed across sectors and across geographies.