ECB's Corporate Sector Purchase Programme: effects on the primary bond market

Sawas Mironidis & Rut Ellen Philippa Key Anstenius

Student thesis: Master thesis

Abstract

The need to understand the bond market reaction to unconventional monetary policy emerged in conjunction with central banks launching initiatives to buy commercial assets under large-scale asset purchase programmes. A restart of the net purchases under the European Central Bank’s (ECB) Corporate Sector Purchasing Programme (CSPP) was signalled on the 18th of June 2019 and then officially announced on the 12th of September the same year. We measure the impact of the ECB’s forward guidance on credit spreads on CSPP eligible bonds. Using bond market data, the regression analysis finds evidence supporting a tightening of credit spreads by 62 basis points among eligible bonds in the quarter following the official CSPP announcement. This shows how central bank communication has a substantial impact on credit spreads among eligible bonds. It also shows the interaction between the CSPP and primary corporate bond market through different transmission mechanisms.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages100
SupervisorsAlessandro Spina