This paper explores the spillover effects of Hurricane Katrina on corporate bonds through the liquidations of bond holdings by property and reinsurance companies exposed to the Katrina shock. We find that the sales of exposed property and reinsurance companies create a persistent negative price...

We study the effect of credit default swap (CDS) on the corporate bond market. We argue that CDS, by reducing the need of investors to liquidate the bonds in the face of credit deterioration of the issuer, reduces fire sale risk and provides bond liquidity. Given that bond investors are...