Abstract
Bond repurchases are widespread in the US and other markets, but data limitations have thus far prevented an analysis of market timing. We fill this gap using unique daily data from Israel, and show that firms time the market in their actual open-market bond repurchases. Firms repurchase their bonds following a decline in bond prices. The disclosure of bond repurchases results in significantly positive abnormal returns on the repurchased bonds and is followed by a positive drift in the 5 subsequent trading days. The market reaction to actual bond repurchases is more timely when the repurchases are conducted within a preannounced program, and the impact is stronger when the firm repurchases high-yield bonds. Insiders’ net purchases increase prior to bond repurchases, and the abnormal return following a bond repurchase tends to be higher when it is preceded by positive net insider purchases. The results lend support to the information motive for bond repurchases.