How did the financial crisis alter the correlations of U.S. yield spreads?

Silvio Contessi, Pierangelo De Pace, Massimo Guidolin

Research output: Contribution to journalArticleResearchpeer-review

12 Citations (Scopus)


We investigate the pairwise correlations of eleven U.S. fixed income yield spreads over a sample that includes the Great Financial Crisis of 2007-09. Using cross-sectional methods and nonparametric bootstrap breakpoint tests, we characterize the crisis as a period in which pairwise correlations between yield spreads were systematically and significantly altered in the sense that spreads comoved with one another much more than in normal times. We find evidence that, for almost half of the fifty-five pairs under investigation, the crisis has left spreads much more correlated than they were previously. This evidence is particularly strong for liquidity- and default-risk-related spreads, long-term spreads, and the spreads that were most likely directly affected by policy interventions.
Original languageEnglish
Pages (from-to)362-385
Number of pages24
JournalJournal of Empirical Finance
Publication statusPublished - Sep 2014
Externally publishedYes


  • yield spreads
  • correlations
  • breakpoint tests
  • nonparametric bootstrap
  • credit risk
  • liquidity risk

Cite this