The Bank of England's quantitative easing (QE) operations have had a notable impact on the corporate bond market, according to a recent study by Mahmoud Fatouh, Simone Giansante, and Meryem Duygun. The research examines the period between 2009 and 2021, focusing on how QE influenced secondary market yields and borrowing costs in the primary market.
The study found that QE led to increased issuance of investment-grade bonds with long maturities due to reduced borrowing costs. However, instead of boosting real investment, companies used additional funds for share buybacks and decreased bank borrowing.
Furthermore, the research distinguishes between the direct effects of purchases under the Corporate Bond Purchase Scheme (CBPS) and the overall impact of QE on the corporate bond market. It reveals that yields for eligible bonds decreased by 40–60 basis points compared to ineligible bonds. Despite this reduction in yields, there was no corresponding decrease in borrowing costs or increase in primary market issuance.
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