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

77 Pages Posted: 21 Jul 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 2020

Abstract

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

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 2020). FRB of New York Staff Report No. 935, 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)
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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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