Chuck Fang

Monetary Policy Amplification through Bond Fund Flows

• WFA Brattle Group PhD Candidate Award for Outstanding Research

• Presentation at CEBRA, ICI, Iowa, McGill, WFA, Kentucky Finance Conference, MFA, EasternFA, NHH, MBS, CUHK, HKU, SMU, NUS, BIS, Wisconsin, Drexel, Tsinghua PBCSF, Tsinghua SEM, PHBS, CKGSB, OFR, FMA, RBFC, Wharton

Liquidity Misallocation on Automated Market Makers

A Demand Approach to Bond Market Transmission of Monetary Policy with Kairong Xiao

Capital Supply, Debt Structure, and Real Investment with Greg Nini

Unrealized Losses and Price Elasticity in the Corporate Bond Market

Do Firms Care about Green Bond Premium?

Restructuring Sovereign Bonds: Holdouts, Haircuts and the Effectiveness of CACs with Julian Schumacher and Christoph Trebesch

Bond-Compustat Link (available to download through Open Source Bond Asset Pricing)

• This is part of my paper "Monetary Policy Amplification through Bond Fund Flows"

• Most bonds are issued through subsidiaries that do not have the same identifiers as ultimate parents, e.g. Shell plc issues bonds through Shell International Finance B.V.

• 19% of issuer CUSIPs change ultimate parents over time, e.g. CUSIP 362338AQ8 changed from Verizon (GVKEY 002136) to Frontier Communications (GVKEY 135484) in 2016.

• I construct real-time bond-GVKEY link using the bond-ticker mapping in TRACE and the ticker-GVKEY mapping in Compustat Snapshot

  • • Bond ticker can differ from stock ticker, e.g. MIT refers to Massachusetts Institute of Technology in TRACE but Mason Industrial Technology in CRSP, CITI refers to Citigroup Inc in TRACE but Canterbury Consulting Group in CRSP, RBC refers to Royal Bank of Canada in TRACE but RBC Bearings Inc (a manufacturer of bearings) in CRSP

    • Berkshire Hathaway owns many public subsidiaries, I link bonds to these subsidiaries instead of BRK. Same for MacAndrews & Forbes.

• This link covers 29,253 foreign issuers (e.g. BMW, GVKEY 100022) and issuers without public equity (e.g. MassMutual, GVKEY 122614), which are not covered in CRSP

• This link covers 8,862 144A bonds (e.g. CUSIP 36164NFH3), which are currently not covered by WRDS Bond-CRSP Link

• I hand check the following violations:

  • Sum of total bond outstanding from Mergent FISD should be less than total debt outstanding from Compustat (DLC + DLTT)

  • Sum of total bond outstanding from Mergent FISD should be similar to total bonds and notes from Capital IQ

Mergent FISD

• Coverage of foreign bonds is not great. For example, Apple's 2022 EUR bond 037833AU4 and 2026 EUR bond 037833AV2 (both issued in 2014) are not covered.

• Many private placements have both 144A CUSIP and RegS CINs. RegS CINS is missing, e.g. for ISSUE_ID 771231, CUSIP shows its 144A CUSIP 29878TDD3, but its RegS CINS B3821S3C9 is missing.

• There are duplicates:

  • Apple's 2025-05-24 EUR bond shows up three times, twice as ISIN XS1619312173 and once with the wrong CUSIP 037833CW8 (which corresponds to the 2029 EUR bond).

  • Peabody Energy Corp's 2022-03-31 bond and 2025-03-31 bond are duplicated.

• OFFERING_AMT and AMOUNT_OUTSTANDING are often off by 1000 times, e.g. for ISSUE_ID 502342 OFFERING_AMT should be 375 million instead of 375 thousand. This can be worrisome if the analysis is about amount of bonds issued or redeemed. The following cases are error prone, and I recommend substitute their values with other databases (e.g. Bloomberg), the logic being that other databases are unlikely to make the same exact mistakes.

  • OFFERING_AMT is greater than 100 billion or less than 10 thousand (~10,000 cases)

  • OFFERING_AMT is more than 100 times the maximum of AMOUNT_OUTSTANDING or vice versa (~8,000 cases)

  • ANOUNT_OUTSTANDING is negative (~10 cases)

  • ANOUNT_OUTSTANDING is positive but EFFECTIVE_DATE is past MATURITY and there is no default (~10 cases)

CRSP US Mutual Fund Holdings

• nbr_shares can be wrong, e.g. crsp_portno 1032215 report_dt 2015-07-31 security_name Bahamas 6.625% 15-May-2033 cusip 056732AE nbr_shares 12600000000 market_val 744000. The following cases are error prone, and I recommend substitute these cases with other databases (e.g. Morningstar), the logic being that other databases are unlikely to make the same exact mistakes.

  • Reported price (market_val / nbr_shares) is more than 100 times the average price reported by other funds or vice versa

  • For debt securities (maturity_dt non-missing), nbr_shares is more than 100 times market_val or vice versa

• Loans are frequently reported as zero-coupon bonds, e.g. "CAESARS RESORT COLLECTION LLC 0.000% 22-Dec-2024". My guess is that when coupon is missing, 0.000% is automatically filled. At the same time, there are bonds with legitimate 0.000%, e.g. "Germany 0.000% 18-Oct-2024".

• Money market funds generally do not have holdings data or crsp_portno.

Capital IQ Debt Structure

• Each instance can be associated with multiple collections: one 10K can contain balance sheet, income statement, etc

• Each collection can be associated with multiple instances: Apple's 2010Q4 balance sheet can come from press release, S-4, 10K, 10K/A

• Some debt structure is heavily abridged and therefore uninformative (e.g. for calculating debt maturity). For example, for companyid 273607, 2010Q3 lumps nearly all debt together under "Other Borrowings", 2012Q2/Q3 lump a couple of long-term bonds together under "Other Borrowings", 2014Q3 (financialcollectionid 1705308346) lumps a couple of long-term bonds together under "Notes Payable". As another example, Apple's debt structure remains the same from 2018Q4 to 2019Q1, but 2018Q4 has all bonds separated out whereas 2019Q1 lumps many bonds together.

• componentid can change over time. For example, 923510253 and 926071562 refer to the same bond, 923510253 is used for 2021-09 and 2022-03, and 926071562 is used for 2021-12 and 2022-06. Therefore, we cannot interpolate data for each component.

• dataitemvalue is in filing currency, see Apple ¥250.0 billion 0.35% notes

• periodenddate can fall on the beginning of next month. For example, the periodenddate for Apple's 2019Q2 10Q is 2019-07-01.

• Maximum of credit line amount (including undrawn credit) is reported sometimes, which can be detected by filtering for dataitemname containing the word "Maximum".

• interestratetype is not very reliable. For example, 923800215 is shown as fixed rate but annual reports clearly suggest that the rate is changing over time.

Compustat