Commodity producing corporations have trillions of dollars in outstanding debt. Thus, the recent fall in commodity prices raised concerns about sustainability and systemic risks. Using a global sample (2003- 2015) we measure how corporate bonds react to the underlying commodity price. On average a 10% change in the commodity moves yields-to-maturity by only 15 basis points. This is just a tenth of the sensitivity of stocks returns. Nonetheless, bond sensitivity to commodities is significantly stronger for smaller, leveraged and less profitable firms. Also for short maturity bonds. The type of commodity price change matters too. Sensitivity to price drops is at least five times stronger than to increases. Transitory price changes matter for shorter maturities and leveraged firms. In contrast, longer maturities react more to permanent commodity variations. When firms use hedging derivatives, bonds are less sensitive to all price variations. Hedging mitigates the amplification of commodity shocks, as in Shiller (2008). In conclusion, while debt finance deteriorated with the commodity bust, it hardly dried-up.

Some projects take time to build or are slow to yield cash flows. This may impact the dynamics of investment and liquidity management, although few studies test their financial implications. We exploit the peculiar advantages of copper mines as a laboratory to identify cash-flow sensitivities. In this context, investment decisions depend on the expectations of the long run price of the commodity, while the spread between the spot price and this long run expectations shifts current cash-flows. For this study we compiled a sample of copper firms between 2002 and 2012. We do not find significant effects of cash flow on current capital expenditures, but we do observe a systematic cash flow sensitivity of cash holdings, meaning that some of these transitory earnings are retained as liquidity. This cash stockpiling is stronger among financially constrained firms. In a context of time-to-build, our findings support financial theories emphasizing the salience of cash as buffer stock for liquidity in preparation for future investment opportunities.