Assessing the Impact of Corporate Bond Purchase Programs: Insights from Israel

Noam Michelson ()
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Noam Michelson: Bank of Israel

No 2025.07, Bank of Israel Working Papers from Bank of Israel

Abstract: This paper evaluates the impact of the Bank of Israel’s corporate bond purchase program initiated in July 2020 amid the COVID-19 pandemic. The analysis reveals that the announcement led to significant reductions in credit spreads for eligible and noneligible bonds, and particularly for A-rated bonds, while actual purchases had an additional, yet limited, effect. Additionally, the program reopened the primary market for noninvestment grade issuances. Finally, the inclusion of bonds issued by commercial banks as eligible for purchasing, a unique feature of the program, had a positive effect on commercial banks' credit supply. This study provides new insights into central bank interventions during financial crises and presents novel evidence for innovative crisis management tools intended to stimulate credit in times of distress.

Pages: 49 pages
Date: 2025-07
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