An Assessment of the Riksbank’s Corporate Bond Purchase Program on the Yield Spread and Firm’s Debt Structure

Sammanfattning

We study the effect of Riksbank’s corporate bond purchase program on the yield spread of bonds and firm-level debt structure. We find evidence that the Riksbank’s corporate quantitative easing announcement reduces the yield spread of eligible bonds compared to the non-eligible bonds. The effect is significant for high-quality and low-quality IG-rated bonds; however, the AAA-A-rated bonds react more than BBB-rated ones. Similarly, the liquidity of eligible bonds improves more than non-eligible groups post-announcement. On the firm-level debt structure data, our result suggests that the corporate purchase program motivates firms to increase capital financing through bonds, while the effect is significant among the non-property sector and those eligible with the AAA-A rating group. The yield spread of bonds purchased by the program experiences a doubled reduction after the statement of the policy. However, the effect of the program introduction on leverage ratios of firms that the Riksbank has purchased their bonds is almost likewise to the impact on the eligible firms. Finally, we performed several robustness tests, and the overall results are consistent with our main findings.