Assessment of the impact of the European Central Bank’s corporate sector purchase programme on bond yields

This thesis analyses the impact of the European Central Bank’s corporate sector purchase programme (CSPP) on targeted and non-targeted bonds. The results will be compared with the impact of the European Central Bank’s public sector purchase programme (PSPP) on the same bonds. The targeted bonds under analysis are European corporate bonds. The non-targeted bonds under analysis are European financial company bonds and European bank bonds. Yield data for these bonds is retrieved from Bloomberg. By making use of the event study methodology, this thesis comes to three main conclusions. Firstly, the corporate sector purchase programme was effective and caused significant declines in the yields on corporate bonds. These declines seem to be very prominent in the middle of the yield curve. Secondly, the corporate sector purchase programme generated spillover effects and caused significant declines in the yields on financial company bonds and bank bonds. This happened while the European Central Bank explicitly mentioned that those bonds were not eligible under the corporate sector purchase programme. Thirdly, the public sector purchase programme affects the financial markets in general, but does not have an impact on corporate bonds, financial company bonds and bank bonds specifically.