Health risk, stimulus packages, and subordinated bank yields: evidence from the COVID-19 outbreak.

This note presents the impact of pandemic on bank subordinated bonds. Using weekly data for the period 10/1/2020-12/3/2021 of 14 US, UK, Spanish, Italian, German, and Canadian banks this note provides empirical evidence that the health risk due to the COVID-19 increases the bank yields, and the stimulus packages achieved the main objective which was to reduce the risk of the bond markets and the yields. The impact of pandemic could be measured by the searches of COVID-19 related terms on Google trends. Moreover, the empirical section shows that subordinated bond yields are influenced negatively by the performance of the stock price and positively by the government yields.