Monetary policy and fragility in corporate bond mutual funds☆ ☆

• 成果类型: Article
• 署名作者: Kuong, John Chi-Fong; O'Donovan, James; Zhang, Jinyuan
• 署名单位: Chinese University of Hong Kong; City University of Hong Kong; University of California System; University of California Los Angeles
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103931
• 发表日期: 2024
• 关键词: Monetary policy; Corporate bond mutual funds; Fund redemption; financial fragility; market liquidity

摘要

We document aggregate outflows from corporate bond mutual funds days before and after the announcement of increases in the Federal Funds Target rate (FFTar). To rationalize this phenomenon, we build a model in which funds' net-asset-values (NAVs) are stale and investors strategically redeem to profit from the mispricing when they learn about the increases of FFTar. Consistent with the model's predictions, we find that stale NAVs and loose monetary policy environments weaken (strengthen) outflows sensitivity to increases in FFTar during illiquid (liquid) market conditions. Our results highlight when and how monetary policy could systematically exacerbate the fragility of corporate bond funds.