The impact of the Bank of England’s Corporate Bond Purchase Scheme on yield spreads

Working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 23 March 2018

Working paper No. 719
By Lena Boneva, Calebe de Roure and Ben Morley

As part of its August 2016 policy package, the Bank of England announced a scheme to purchase up to £10 billion of corporate bonds. Only sterling investment-grade bonds issued by firms making a ‘material’ contribution to the UK economy were eligible to be purchased. So eligible bonds constitute a natural treatment group to estimate the announcement effect of the policy in a difference-in-differences approach. Our results suggest that the scheme reduced spreads of eligible bonds by 13–14 basis points compared to foreign bonds issued by the same set of firms, and by 2–5 basis points compared to ineligible sterling corporate bonds. But because of spillover effects, these estimates should be interpreted as a lower bound.

PDFWorking paper No. 719

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