The economic factors that influence corporate bond yields are interest rates, inflation, and economic growth. All these factors affect corporate bond yields and exert influence on each other. The pricing of corporate bond yields is a multivariable, dynamic process in which there are always competing pressures.
For example, economic growth is bullish for corporations as it leads to increased revenues and profits for companies, making it easier for them to borrow money and service debt, which leads to reduced risk of default and lower yields. However, extended periods of economic growth led to inflation risk and upward pressure on wages. Economic growth leads to increased competition for labour and diminished excess capacity.
