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The Covid pandemic in the market: infected, immune and cured bonds

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  • Zaghini, Andrea

Abstract

By focusing on the cost conditions at issuance, I find that not only the Covid-19 pandemic effects were different across bonds and firms at different stages, but also that the market composition was significantly affected, collapsing on investment-grade bonds, a segment in which the share of bonds eligible to the ECB corporate programmes strikingly increased from 15% to 40%. Contemporaneously, the high-yield segment shrunk to almost disappear at 4%. Another source of risk detected in the pricing mechanism is the weak resilience to pandemic: the premium requested is around 30 bp and started to be priced only after the early containment actions taken by the national authorities. On the contrary, I do not find evidence supporting an increased risk for corporations headquartered in countries with a reduced fiscal space, nor the existence of a premium in favour of green bonds, which should be the backbone of a possible “green recovery”. JEL Classification: G15, G32, E52

Suggested Citation

  • Zaghini, Andrea, 2021. "The Covid pandemic in the market: infected, immune and cured bonds," Working Paper Series 2563, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20212563
    Note: 3828417
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    Cited by:

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    2. Simone Letta & Pasquale Mirante, 2023. "Investigating the determinants of corporate bond credit spreads in the euro area," Temi di discussione (Economic working papers) 36, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    corporate quantitative easing; Covid pandemic; ECB; green bonds;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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