Tbe Review of Financial Studies/v 6 n 4 1993 12 Lehman Brothers Trader Quoles S&P Bond Guide (Matrix Prices) 9 Govemment/Corporale Index 5】 32-101 Announcement Month (0=October 1986) Figure 1 Yield reaction around Lear Siegler LBO announcement for 11%percent bond of 10/91 The Government/Corporate Index benchmark series combines Lehman Brothers Government and Corporate Bond Indexes.The Corporate Bond Index includes all public,fixed-rate,nonconvertible investment-grade debt.The Government Bond Index includes all U.S.Government guaranteed bonds and notes excluding flower bonds and foreign-targeted issues.Bonds must have a minimum outstanding principal of $25 million and a minimum maturity of one year to quality for any Lehman Brothers bond index. 1991.We collected in-house trader-quoted bid yields from Lehman Brothers (further described in Section B)around this event to match with the s&P yields,and both series are plotted.We also provide the yields to Lehman Brothers'combined Intermediate Term Corporate/ Government Bond Index,which is a commonly used benchmark for gauging bond market performance.Although we are not privy to the exact index or bond that IDC uses to matrix price the Lear Siegler bond,it appears that the bond's matrix-based prices track the Lehman Brothers Corporate/Government Index fairly well.The S&P data exhibit virtually no change around the event,whereas the trader- quoted yields from Lehman Brothers indicate a 200-basis-point increase in yield (and a corresponding decrease in the price Lehman Brothers was willing to pay for the bond).It is the absence of independent movement in the s&P data at the LBO announcement date that sug- gests the prices reported for the bond by s&P (and created by IDC) are just fixed spreads off of some index or more actively traded U.S. Treasury issue. In an article on corporate buyouts,Asquith and Wizman (1990) found that 46 bonds of companies involved in successful LBOs have 964