Quantify the Quantitative Easing: Impact on Bonds and Corporate Debt Issuance

47 Pages Posted: 29 Mar 2018 Last revised: 11 May 2020

See all articles by Karamfil Todorov

Karamfil Todorov

Bank for International Settlements

Date Written: July 19, 2017


This paper studies the impact of the ECB’s Corporate Sector Purchase Programme (CSPP) announcement on prices, liquidity and debt issuance in the European corporate bond market using a dataset on bond transactions from Euroclear. I find that the QE programme increased prices and liquidity of bonds eligible to be purchased substantially. Bond yields dropped on average by 30 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 (QE), Corporate Sector Purchase Programme, European Central Bank, bond market, corporate debt issuance

JEL Classification: E52, E58, G12, G18

Suggested Citation

Todorov, Karamfil, Quantify the Quantitative Easing: Impact on Bonds and Corporate Debt Issuance (July 19, 2017). Journal of Financial Economics, 135(2), 340-358 , Available at SSRN: https://ssrn.com/abstract=3139875 or http://dx.doi.org/10.2139/ssrn.3139875

Karamfil Todorov (Contact Author)

Bank for International Settlements ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002

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