Collateral eligibility of corporate debt in the Eurosystem

Arbeitspapier

We study how the Eurosystem Collateral Framework for corporate bonds helps the European Central Bank (ECB) fulfill its policy mandate. Using the ECBs eligibility list, we identify the first inclusion date of both bonds and issuers. We find that due to the increased supply and demand for pledgeable collateral following eligibility, (i) securities lending market trading activity increases, (ii) eligible bonds have lower yields, and (iii) the liquidity of newly-issued bonds declines, whereas the liquidity of older bonds is una↵ected/improves. Corporate bond lending relaxes the constraint of limited collateral supply, thereby making the market more cohesive and complete. Following eligibility, bond-issuing firms reduce bank debt and expand corporate bond issuance, thus increasing overall debt size and extending maturity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SAFE Working Paper ; No. 275

Classification and Topics

• Classification: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Information and Market Efficiency; Event Studies; Insider Trading ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Central Banks and Their Policies
• Subject: Collateral Policy ; ECB ; Corporate Bonds ; Corporate Debt Structure ; Eligibility premium

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pelizzon, Loriana ; Riedel, Max ; Simon, Zorka ; Subrahmanyam, Marti G.
• Event: Veröffentlichung
• (who): Leibniz Institute for Financial Research SAFE
• (where): Frankfurt a. M.
• (when): 2020

Further information

• DOI: doi:10.2139/ssrn.3586409
• Handle: http://hdl.handle.net/10419/216769
• Last update: 10.03.2025, 11:45 AM CET