The paper quantifies the effects of the Eurosystem's purchases of corporate bonds issued by non-bank corporations established in the euro area on their spreads at issuance over the risk-free interest rate. To this end, a new econometric methodology has been developed, which allows us to evaluate the potential reduction in funding costs for the companies benefiting from the programme, following its announcement in March 2016.
A descriptive analysis reveals a significant reduction in the spreads at issuance of the bonds issued after the announcement of the programme. Our estimates suggest that the programme led to a decrease in the spreads at issuance of approximately 50 basis points for the bonds around the eligibility threshold (investment grade).
Forthcoming in: Annals of Applied Statistics