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ERBE 02 2 03

The Impact of the ECB’s PEPP on Euro Area Bond Spreads


a Universidade Católica Portuguesa, Católica Porto Business School and CEGE, Portugal; b BNP Paribas Corporate & Institutional Banking, Portugal.

To cite this article:

Pinto, João & Tiago Costa. 2023. The impact of the ECB’s PEPP on euro area bond spreads, European Review of Business Economics II(2): 53-81.


Received: 10 December 2022. Accepted 18 June 2023. Published: 30 June 2023

Language: English

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We examine the impact of the European Central Bank’s Pandemic Emergency Purchase Programme (PEPP) on euro area banks, non-financial firms, and governments’ cost of borrowing. Using a large sample of 751 sovereign bonds, 2,116 corporate bonds, 469 covered bonds, and 725 asset-backed securities, issued in the 2018-2021 period, and subsamples of eligible bonds, we find that the PEPP successfully reduced corporate, covered, and sovereign bond spreads in both the announcement and purchasing periods, consistent with signalling, direct, and portfolio rebalancing channels of monetary policy. For asset-backed securities, the findings are mixed: while we show a spread reduction during the purchasing period for the full sample, we do not find any significant impact for bonds fulfilling eligibility criteria. Finally, we show that the PEPP’s impact on bond spreads is significantly higher for those issued in GIIPS versus core European countries.


Quantitative easing; PEPP; cost of borrowing; bond spreads.

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