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Demand-Driven Bond Financing in the Euro Area

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  • Pegoraro, Stefano
  • Montagna, Mattia

Abstract

We show non-financial corporations changed the quantity and composition of their bond issues in response to the European Central Bank’s corporate quantitative easing program. Eligible issuers shifted toward bonds meeting the program’s eligibility requirements. Moreover, demand for credit risk increased, and risk premia in the bond market dropped after the announcement. Eligible and ineligible firms increased total issuance and shifted toward bonds with riskier characteristics, namely unsecured and non-guaranteed bonds. Total issuance increased the most among those firms that were most exposed to the decline in risk premia. Firms also shifted away from short-maturity instruments and issued more fixed-coupon bonds.

Suggested Citation

  • Pegoraro, Stefano & Montagna, Mattia, 2025. "Demand-Driven Bond Financing in the Euro Area," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 60(6), pages 2847-2878, September.
    • Handle: RePEc:cup:jfinqa:v:60:y:2025:i:6:p:2847-2878_9
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