Liquidity in the German corporate bond market: Has the CSPP made a difference?
Mevlud Islami and
No 08/2021, Discussion Papers from Deutsche Bundesbank
The Eurosystem purchased €178 billion of corporate bonds between June 2016 and December 2018 under the Corporate Sector Purchase Programme (CSPP). Did these purchases lead to a deterioration of liquidity conditions in the corporate bond market, thus raising concerns about unintended consequences of large-scale asset purchases? To answer this question, we combine the Bundesbank's detailed CSPP purchase records with a range of liquidity indicators for both purchased and nonpurchased bonds. We find that while the flow of purchases supported secondary market liquidity, liquidity conditions deteriorated in the long-run as the Bundesbank reduced the stock of corporate bonds available for trading in the secondary market.
Keywords: Corporate Bond Market; Central Bank Asset Purchases; Market Liquidity (search for similar items in EconPapers)
JEL-codes: E52 F30 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-isf, nep-mac, nep-mon and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:082021
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