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Multimarket Trading And The Cost Of Debt: Evidence From Global Bonds

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Executive Summary

Global bonds are international securities designed to be traded and settled efficiently in multiple markets. This paper studies global bonds to examine the effects of multimarket trading on corporate bond liquidity, prices, and the cost of debt. Using a sample of primary and secondary market transactions matched by issuer, the author finds that global bonds command a significant liquidity and price advantage over comparable domestic bonds. On average, global bonds trade at yields 15 to 25 basis points below domestic bonds of the same issuers, with the difference being greater for speculative grade bonds and in times of crisis.

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