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From purchases to exit: central bank interventions in corporate debt markets

Author

Listed:
  • Breckenfelder, Johannes
  • Schepens, Glenn

Abstract

Central banks increasingly act as market-makers-of-last-resort, yet the impact and exit of such interventions remain poorly understood. Using euro-area data, we analyze the cycle of market freeze, intervention, and exit in short-term debt markets. A run on money market funds (MMFs) triggered a collapse in these markets in March 2020. Firms replaced only 27% of lost funding through credit lines. The European Central Bank intervened, fully replacing MMFs for some firms and allowing them to issue more debt at lower rates and longer maturities. After the ECB’s exit, more-exposed firms faced higher yields (+20.2 bps), reduced MMF investments, and fewer new relationships. Credit line take-up did not materially change post-exit. JEL Classification: G11, G23, G32, E5

Suggested Citation

  • Breckenfelder, Johannes & Schepens, Glenn, 2025. "From purchases to exit: central bank interventions in corporate debt markets," Working Paper Series 3055, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20253055
    Note: 1125999
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    More about this item

    Keywords

    central bank intervention; commercial paper; exit; market-maker-of-last resort; money market funds; short-term corporate debt;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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