Credit easing versus quantitative easing: evidence from corporate and government bond purchase programs

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 20 September 2019

Staff Working Paper No. 825

By Stefania D’Amico and Iryna Kaminska

Using security-level data, we analyse the effects of the Bank of England’s multiple rounds of gilt purchases (aka Quantitative Easing, QE) and its Corporate Bond Purchase Scheme (aka Credit Easing, CE) on corporate bond prices and issuance. This allows direct estimation of (i) QE’s cross-asset supply effects and (ii) the joint supply effects of QE and CE. We show that in the case of QE alone, the pass-through of the gilt supply shock to corporate bond prices is significant, is larger in the longer-run than at announcement, and is often limited to the default-free component of the corporate yield. In the case of the joint conduct of QE and CE, we find that the CE is more effective than QE in reducing credit spreads, especially for higher-rated bonds, and in stimulating corporate bond issuance, which responds quite rapidly to the corporate bond supply shock.

PDFCredit easing versus quantitative easing: evidence from corporate and government bond purchase programs

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