Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216769 
Year of Publication: 
2020
Series/Report no.: 
SAFE Working Paper No. 275
Publisher: 
Leibniz Institute for Financial Research SAFE, Frankfurt a. M.
Abstract: 
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.
Subjects: 
Collateral Policy
ECB
Corporate Bonds
Corporate Debt Structure
Eligibility premium
JEL: 
G12
G14
G32
E58
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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