We construct a new historical corporate bond database spanning 128 calendar years to address longstanding data limitations hampering corporate bond research. By hand-collecting monthly corporate bond quotes from three archival print sources, we complement existing datasets and create an extensive database dating back to 1895, comprising nearly 110,000 unique bonds and 8 million observations. Leveraging this expanded sample, we find that the lack of priced risks in corporate bonds documented by recent studies stems from their reliance on short samples. With greater statistical power, we show that prominent bond and stock factors as well as several nontraded macroeconomic factors are significantly priced with theoretically consistent signs. At the same time, the predictive power of corporate bond spreads for real activity is largely robust in the longer sample, except when pre-war data are included. Our database, covering major economic episodes like the Great Depression, not only helps validate previous empirical findings but aims to facilitate further research by serving as a CRSP counterpart for corporate bonds.

We use detailed data on fixed-income benchmark indexes in Canada and the U.S. to provide systematic evidence of how benchmarking shapes corporate bond ownership and prices. Funds hold sparse portfolios, and index weights strongly influence which bonds active and passive funds select. We rationalize these patterns in a model with benchmarked managers who face portfolio management costs, which predicts which assets managers optimally include in their portfolios. In the model, a bond's price increases with its benchmarking intensity (BMI)—a measure of the amount of fund capital benchmarked against the bond—while portfolio sparsity attenuates this price impact for excluded bonds. Exploiting discontinuities in benchmarked assets around bond maturity cutoffs, we show that increases in bonds’ BMIs lead to reductions in yield spreads and increases in fund ownership—but only for bonds predicted to enter sparse portfolios.

U.S. monetary policy significantly impacts sovereign credit risk and financial intermediaries play an important role. Using market-based measures of intermediary stress and confidential dealer-country-level sovereign CDS positions, we show that a decline in intermediary risk-taking capacity prior to FOMC announcements amplifies the sensitivity of sovereign spreads to U.S. monetary policy shocks. A general equilibrium model of the world economy explains these findings through occasionally-binding intermediary borrowing constraints that magnify sovereign default risk movements. The model suggests that credit spread movements in response to monetary policy are driven by an intermediation premium, which creates spillovers to both low and high-risk countries.