Corporate Yield Spreads and Bond Liquidity

Entry

# Corporate Yield Spreads and Bond Liquidity ## Mechanism Bond illiquidity increases corporate yield spreads; liquidity improvement can compress spreads. ## Hypothesis A liquidity premium monitor can separate default risk from liquidity-driven spread widening. ## Required Data - Corporate bond spreads - Liquidity proxy - Treasury curve - Volatility proxy ## Signal Inputs - Yield spread - Liquidity spread - Spread change - Regime filter ## Entry Logic Monitor widening when liquidity deteriorates faster than default proxy. ## Exit Logic Exit or downgrade signal when liquidity normalizes or default risk dominates. ## Risk Rules Avoid illiquid instruments and stale pricing. ## Regime Fit - Stress regime - Liquidity-fracture regime ## Failure Modes - Stale pricing - Credit event contamination - Liquidity proxy failure ## Evidence Sources - openalex:https://openalex.org/W3122458556 ## Source Intake - Object Type: paper - Object ID: openalex:https://openalex.org/W3122458556 - Source: openalex - Year: 2007 - Venue: The Journal of Finance

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Promoted from Alpha Factory draft alpha_20260701150133_corporate-yield-spreads-and-bond-liquidity.

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Analyze "Corporate Yield Spreads and Bond Liquidity" from a hedge-fund macro and derivatives perspective. Context: A liquidity premium monitor can separate default risk from liquidity-driven spread widening. Cover mechanism, tradable expression, risk conditions, failure modes, and related Codex objects. If useful, outline how Alpha Factory could intake this object.