The COVID Pandemic in the Market: Infected, Immune and Cured Bonds

45 Pages Posted: 16 Feb 2021

Multiple version iconThere are 2 versions of this paper

Date Written: December 14, 2020


By focusing on the cost conditions at issuance, I find that not only the COVID-19 pandemic effects were different across bonds and firms at different stages, but also that the market composition was significantly affected, collapsing on investment- grade bonds, a segment in which the share of bonds eligible to the ECB corporate programmes strikingly increased from 15% to 40%. At the same time the high-yield segment shrunk to almost disappear at 4%. In addition to a market segmentation along the bond grade and the eligibility to the ECB programmes, another source of risk detected in the pricing mechanism is the weak resilience to pandemic: the premium requested is around 30 basis points and started to be priced only after the early containment actions taken by the national authorities. On the contrary, I do not find evidence supporting an increased risk for corporations headquartered in countries with a reduced fiscal space, nor the existence of a premium in favour of green bonds, which should be the backbone of a possible “green recovery”.

Keywords: ECB, Corporate quantitative easing, COVID pandemic, Green bonds

JEL Classification: G15, G32, E52

Suggested Citation

Zaghini, Andrea, The COVID Pandemic in the Market: Infected, Immune and Cured Bonds (December 14, 2020). CFS Working Paper, No. 653, 2020, Available at SSRN: or

Andrea Zaghini (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

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