The purchase of corporate debt securities was one of the unconventional monetary policy measures adopted by central banks over the past decade. In the euro area, the corporate securities purchase program (CSPP) was announced on 10 March 2016. On that date, the ECB announced that, as of 8 June 2016, it would start the acquisition of debt securities of euro area non-financial corporations that met a set of eligibility criteria.

The assessment of corporate bond yields after this announcement shows that the financing costs of companies that issue bonds in the euro area decreased after the program announcement. As soon as the Eurosystem effectively started to buy the bonds, yields decreased further. This decrease was widespread, but, contrary to what might be expected, it was relatively stronger for securities not eligible for purchase by the ECB. This result, which is confirmed in regressions that control for a set of characteristics of securities and issuers, is consistent with a portfolio rebalancing by economic agents towards riskier securities. In Portugal, there was also a general decrease in financing costs for companies that issue debt securities, but the decrease was more significant for eligible bonds.

For more details see Bonfim and Capela (2020), “The effect of corporate bond purchases by the ECB on firms’ borrowing costs”,  published in Banco de Portugal Economic Studies (Vol. 6, N. 3).

Prepared by Diana Bonfim and André Capela. The analyses, opinions and findings expressed above represent the views of the authors and not necessarily those of Banco de Portugal or the Eurosystem.

If you want to receive an e-mail whenever a new “Economics in a picture” is published send your request to info@bportugal.pt.