Collateral eligibility of corporate debt in the Eurosystem

Loriana Pelizzon, Max Riedel, Zorka Simon and Marti G. Subrahmanyam

Journal of Financial Economics, 2024, vol. 153, issue C

Abstract: We study the many implications of the Eurosystem collateral framework for corporate bonds. Using data on the evolving collateral eligibility list, we identify the first inclusion dates of bonds and issuers and use these events to find that the increased supply and demand for pledgeable collateral following eligibility (a) increases activity in the corporate securities lending market, (b) lowers eligible bond yields, and (c) affects bond liquidity. Thus, corporate bond lending relaxes the constraint of limited collateral supply and thereby improves market functioning.

Keywords: Collateral policy; European Central Bank (ECB); Corporate bonds; Eligibility premium (search for similar items in EconPapers)
JEL-codes: E58 G12 G18 G28 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:153:y:2024:i:c:s0304405x23002179

DOI: 10.1016/j.jfineco.2023.103777

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