It’s What You Say and What You Buy: A Holistic Evaluation of the Corporate Credit Facilities

88 Pages Posted: 21 Jul 2020 Last revised: 10 Nov 2020

See all articles by Nina Boyarchenko

Nina Boyarchenko

Federal Reserve Bank of New York

Anna Kovner

Federal Reserve Bank of New York

Or Shachar

Federal Reserve Bank of New York

Date Written: July 1, 2020

Abstract

We evaluate the impact of the Federal Reserve corporate credit facilities (PMCCF and SMCCF). A third of the positive effect on prices and liquidity occurred on the announcement date. We document immediate pass-through into primary markets, particularly for eligible issuers. Improvements continue 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 the greatest impact on investment grade bonds and in industries less affected by COVID, concluding that the improvement in corporate credit markets can be attributed both to announcement effects of Federal Reserve interventions on the economy and to the specific differential impact of the facilities on eligible issues.

Keywords: corporate credit facilities, bond liquidity, credit spreads, purchase effects

JEL Classification: G12, G18, G19

Suggested Citation

Boyarchenko, Nina and Kovner, Anna and Shachar, Or, It’s What You Say and What You Buy: A Holistic Evaluation of the Corporate Credit Facilities (July 1, 2020). Available at SSRN: https://ssrn.com/abstract=3654390 or http://dx.doi.org/10.2139/ssrn.3654390

Nina Boyarchenko (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7339 (Phone)
212-720-1582 (Fax)

Anna Kovner

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Or Shachar

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
(212) 720-6974 (Phone)
(212) 720-1582 (Fax)

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