In this paper, we analyze the key drivers of bond covenant prices by employing a novel measurement approach based on secondary market data. We find that covenant prices vary significantly over time and are associated with market-wide credit risk, volatility, and macroeconomic variables. Apart from the time-series dynamics, there is also significant variation across bond and firm characteristics. In particular, covenant prices increase with the riskiness of bonds and are higher for firms that have more growth options, more tangible assets, and are smaller. Furthermore, we document a positive correlation between the prices of covenants and their subsequent inclusion rates.

We analyze the effects of political uncertainty on prices and liquidity of sovereign bonds. Specifically, we investigate Italian government bonds during the European sovereign debt crisis and focus on political summits and elections. We find a significant drop in prices in combination with high illiquidity and sell-side pressure before the events. The event returns are significantly positive and followed by a positive price trend. The effects are stronger when uncertainty, as measured by the EPU index, is high and economic conditions are weak. In addition, political uncertainty also affects the primary market and we find significant costs associated with issuing sovereign bonds in highly uncertain times.

We study the effects of ESG performance and preferences on the U.S. corporate bond market. Consistent with the theory, we show that firms with superior ESG scores benefit from lower yields and improved liquidity. In addition, we reveal a time-varying effect of ESG performance induced by a changing demand of investors for ESG securities. The effect on yields for firms with higher ESG performance in times of higher ESG preferences is up to 25 bp. Furthermore, we divide a firm's ESG performance into its underlying pillars E, S, and G, finding that the results are mainly driven by environmental concerns. Overall, our results provide evidence for theoretical models based on non-pecuniary utility benefits for ESG investors.