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2024-02-01

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cc-by (c) Cohen, Lior; Furman, Itai, 2024
Si us plau utilitzeu sempre aquest identificador per citar o enllaçar aquest document: https://hdl.handle.net/2445/229135

The impact of the ECB's PEPP project on the COVID-19-Induced crisis in the corporate bond market

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Recurs relacionat

https://doi.org/10.1016/j.econlet.2024.111563

Resum

We examine the financial crisis in the European corporate bond market following the COVID-19 pandemic and assess the effectiveness of the ECB’s QE program, PEPP, in mitigating it. Using credit (Z-spread) and liquidity (scaled bid-ask spread) spreads, we find that the crisis elevated Z-spreads of corporate bonds and mostly raised the bid-ask spread of ineligible bonds – indicating that the pre-pandemic QE shored up the liquidity of eligible bonds. Moreover, ineligible bonds issued by firms in COVID-19 hard-hit industries experienced the steepest increase in the credit and liquidity spreads. The results show that PEPP decreased the credit spreads of ineligible bonds via the portfolio rebalancing channel, especially in pandemic-sensitive industries; however, it did not improve corporate bonds’ liquidity conditions.

Matèries

COVID-19, Crisis financeres

Matèries (anglès)

COVID-19, Financial crises

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Articles publicats en revistes (Economia)

Citació

COHEN, Lior and FURMAN, Itai. The impact of the ECB's PEPP project on the COVID-19-Induced crisis in the corporate bond market. Economics Letters. 2024. Vol. 235. ISSN 0165-1765. [consulted: 23 of May of 2026]. Available at: https://hdl.handle.net/2445/229135

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