It’s What You Say and What You Buy: A Holistic Evaluation of the Corporate Credit Facilities
77 Pages Posted: 21 Jul 2020
Date Written: July 2020
We document that the announcement of the corporate credit facilities by the Federal Reserve (PMCCF and SMCCF) had an immediate positive impact on corporate bond market prices and liquidity, with a third of the eﬀect realized on the announcement date. We document immediate pass-through into primary markets, particularly for eligible issuers. Improvements continue after the initial announcement is made as additional information is shared and purchases begin, with the impact of bond purchases larger than the impact of purchases of ETFs. Exploiting cross-sectional evidence, we see that the improvement in corporate credit markets can be attributed both to announcement eﬀects of Federal Reserve interventions on the economy more broadly as well as to the facilities speciﬁcally, through diﬀerential eﬀects on eligible issues.
Keywords: corporate credit facilities, bond liquidity, credit spreads, purchase effects
JEL Classification: G12, G18, G19
Suggested Citation: Suggested Citation