Navigating Central Bank Intervention in Corporate Bond Markets

May 2, 2017

Since the 2008 financial crisis, major central banks have purchased $9 trillion of bonds in efforts to reinvigorate the global economy. We focus on the impact of the ECB’s Corporate Sector Purchase Program. We find evidence that it has been a significant force in driving euro spreads tighter and stimulating corporate issuance. We examine the impact of the ECB program on a hypothetical credit value strategy investing in euro-denominated corporate debt. The analysis highlights how the portfolio was  re-configured in the face of the ECB’s program, while performance attribution tools show how the strategy would have generated excess returns.