I am trying to price a 30 yr bond maturing in December 15, 2035. The bond is rated A- (S&P). Where can I find the spreads for corporate bonds rated A- maturing in 23 years (December 2035)? I have access to Bloomberg, but so far all I was able to find was individual bond yields. Is the 23 yr corporate spread available? Lastly, just to be sure. I use the 23 year spread + 23 treasury, and not the 30 year for a bond maturing in 2035?
3
-
$\begingroup$ Have you tried the YAS function? It should have the G-spread on there. $\endgroup$– JohnNov 15, 2012 at 16:27
-
$\begingroup$ I think the YAS function only gave me the spreads between treasuries and 1 particular bond. If want to price a A- bond maturing in 23 years, then what is and how do I find the appropriate discount rate? $\endgroup$– KudsNov 15, 2012 at 16:31
-
$\begingroup$ Ah, so what you really want would be like an A- yield curve to use that spread to price a hypothetical bond. If you have a sample of all A- bond yields, you could construct your own but I'm not sure what providers give something similar. $\endgroup$– JohnNov 15, 2012 at 18:32
Add a comment
|
2 Answers
$\begingroup$
$\endgroup$
On Bloomberg you can go to CRVF >> Credit >> From the rating section select A and in the curves search section search by 'A-'. The curves are broken down by industries, so would be best if you have a specific industry in mind. You can also build your own curve.
$\begingroup$
$\endgroup$
You may wish to consider this process a little more generally. That is to say, you are defining a cohort of comparable bonds as 23-year A- rated bonds. Bloomberg doesn't supply a long-dated A- curve, so no matter how you approach this, you will effectively be modeling this bond spread against others in its cohort.
I suggest redefining the cohort to be 20-30 year bonds in the same industry with any level of A rating. Find the average spread $ s $ to treasuries and then apply $s$ to the 23-year point on the treasury curve to come up with a value.
Needless to say, if you have views on recovery rate, capital structure changes, or other hard-to-model criteria you should consider them. The whole process is very fuzzy so you won't be introducing any extra error.
