 Quantify the quantitative easing: Impact on bonds and corporate debt issuanceJournal of Financial Economics, 2020, vol. 135, issue 2, 340-358 Abstract: This paper studies the impact of the European Central Bank’s (ECB) Corporate Sector Purchase Programme (CSPP) announcement on prices, liquidity, and debt issuance in the European corporate bond market using a data set on bond transactions from Euroclear. I find that the quantitative easing (QE) programme increased prices and liquidity of bonds eligible to be purchased substantially. Bond yields dropped on average by 30 basis points (bps) (8%) after the CSPP announcement. Tri-party repo turnover rose by 8.15 million USD (29%), and bilateral turnover went up by 7.05 million USD (72%). Bid-ask spreads also showed significant liquidity improvement in eligible bonds. QE was successful in boosting corporate debt issuance. Firms issued 2.19 billion EUR (25%) more in QE-eligible debt after the CSPP announcement, compared to other types of debt. Surprisingly, corporates used the attracted funds mostly to increase dividends. These effects were more pronounced for longer-maturity, lower-rated bonds, and for more credit-constrained, lower-rated firms. Keywords: Quantitative easing; Corporate Sector Purchase Programme; ECB; Bond market; Corporate debt issuance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:135:y:2020:i:2:p:340-358 DOI: 10.1016/j.jfineco.2019.08.003 Access Statistics for this article Journal of Financial Economics is currently edited by G. William Schwert More articles in Journal of Financial Economics from Elsevier |
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