Blog post

Corporates are responding to the new ECB corporate sector purchase programme

We have observed a sharp increase in corporate bond issuance following the ECB’s announcement in March this year, but it is too early to see the effec

Publishing date
16 June 2016
Authors
Maria Demertzis

With the ECB’s purchases of corporate bonds, which started on the 8th of June, the ECB’s interventions in bond markets have become much more targeted. The Corporate Sector Purchase Programme (CSPP) involves outright purchases of investment grade euro-denominated bonds issued by non-bank corporations in the euro-area.

CSPP is carried out by six central banks - Belgium, Germany, Spain, France, Italy and Finland. Purchases are conducted both in primary and secondary markets.

There is some evidence that corporates have sought to take advantage of the ECB decision by issuing a greater amount of securities, following the announcement in March this year.

It is too early to judge whether the ECB action is proving effective. It may be useful to bypass the banks, but it is not sufficient. For this measure to be successful, the corporate sector needs to funnel the money borrowed to the real economy. If the money borrowed from the ECB is used to make progress with deleveraging, then the economy will not benefit in the short run (although there will eventually be benefits, by having healthier corporations). The ECB’s rationale is to take on the risk that banks are currently unable or unwilling to take.

About the authors

  • Maria Demertzis

    Maria Demertzis is a Senior fellow at Bruegel and part-time Professor of Economic Policy at the Florence School of Transnational Governance at the European University Institute. She was Bruegel’s Deputy Director until December 2022. She has previously worked at the European Commission and the research department of the Dutch Central Bank. She has also held academic positions at the Harvard Kennedy School of Government in the USA and the University of Strathclyde in the UK, from where she holds a PhD in economics. She has published extensively in international academic journals and contributed regular policy inputs to both the European Commission's and the Dutch Central Bank's policy outlets. She contributes regularly to national and international press and has regular column that appears twice a month in various EU newspapers and on Bruegel’s opinion page.

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