The demand for corporate bonds

This paper analyzes the determinants of investor demand for corporate bond issues and show that the level of orderbook demand varies substantially across issues. We compare the extent to which credit risk, information costs, and bond market presence can explain variation in investor demand for issued bonds. We find that demand is increasing with the credit spread, decreasing with credit rating and issue frequency, and that investors demand higher quantities of bonds for issues by firms from outside of major bond markets. These results highlight that bond fund managers place higher order quantities for relatively scarce securities that can potentially offer greater risk-reward combinations as part of a diversified portfolio. Demand is lower for debut issuers, suggesting an asymmetric threshold for investor demand between debut and established bond market issuers. JEL Classification: G11, G12, G24