Since the 2008 financial crisis, major central banks have purchased $9 trillion of bonds in efforts to reinvigorate the global economy. Government guaranteed securities comprise 96% of these purchases. Several central banks have purchased corporate bonds; the European Central Bank (ECB) is the largest buyer of these bonds and remains an active purchaser.
With signs of rising inflation, the markets are increasingly focused on central banks potentially tapering purchases and ultimately retiring their programs. Key questions facing institutional investors include: What has been the impact of the programs and what happens if and when the programs are eventually wound down? What are the implications for their portfolios?
We focus on the impact of the ECB’s Corporate Sector Purchase Program (CSPP). We find evidence that it has been a significant force in driving euro spreads tighter and stimulating corporate issuance. However, the benefits from the program have not been uniform. High spread (typically lower-rated) bonds have significantly outperformed lower spread bonds. The program also appears to have benefitted bonds that do not qualify, including bonds issued by banks and non-eurozone issuers.
Source : MSCI