Debt financing, the pandemic, and Federal Reserve interventions

Grace E. Arnold, Takeshi Nishikawa and Meredith E. Rhodes

Journal of Financial Research, 2025, vol. 48, issue 3, 929-949

Abstract: Using data on newly issued corporate bonds and syndicated loans, we investigate the effects of the Federal Reserve's interventions during the pandemic on corporate debt activity. We document heterogeneous effects for participation rates across firm credit ratings and debt maturity, consistent with a default risk channel of policy transmission. Investment‐grade firms disproportionately participate in debt markets following the Fed's announcements, which is driven by the riskiest firms (A and BBB ratings). We also find that BBB and BB‐rated firms drive increased participation in short‐term debt markets. These results provide evidence that the Fed's interventions improved credit market access to investment‐grade firms and the highest‐rated noninvestment‐grade firms.

Date: 2025
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