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The effect of corporate bond purchases by the ECB on firms’ borrowing costs

André Capela
Publication Year 
One of the measures included in the quantitative easing policy adopted by the ECB was the purchase of corporate bonds. In this article, we analyze the announcement effects of the corporate sector purchase programme (CSPP). Only bonds that meet a set of criteria can be purchased by the Eurosystem. Using a difference-in-differences estimation, we compare the evolution of bond prices for eligible versus non-eligible corporate bonds. We confirm previous results for the euro area, showing that the decrease of the yields on non-eligible bonds was larger than on eligible ones. These results show that there were indirect effects stemming from the CSPP, which are consistent with a portfolio rebalancing mechanism. For the case of Portugal, the announcement had a more positive effect on CSPP-eligible securities. Despite the lower financing costs, eligible issuers in Portugal did not significantly change their issuance behavior.
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