A Yield Spread Analysis of the Green Bond Premium and Liquidity in the Swedish Green Bond Market

This study investigates green bond premium and liquidity in the Swedish SEK green bond market. Through a matching pair’s methodology with 101 green Swedish SEK Green bonds and conventional counterparts, the yield spread is analyzed through a liquidity risk and a green bond premium perspective. The results of the Swedish SEK green bond sample suggest that green bonds compensate for liquidity and that corporate green bonds seem to be more liquid than their conventional counterparts. The results did not show enough significance on the green bond premium. Hence, no answer on whether green bonds have a higher or lower return solely because of the fact that they are green can be given. The regression results of the green bond premium, however, suggest that the predominant determinants of the size of the green bond premium seem to be whether the bond is a corporate or municipal bond and what type of sector the bond is associated with.MSc in Financ