Collateral Eligibility of Corporate Debt in the Eurosystem

118 Pages Posted: 27 Apr 2020 Last revised: 5 Jul 2023

See all articles by 264068 264068

264068 264068

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE; Ca Foscari University of Venice - Dipartimento di Economia

1773767 1773767

Leibniz Institute for Financial Research SAFE

2205330 2205330

Leibniz Institute for Financial Research SAFE

738 738

New York University (NYU) - Leonard N. Stern School of Business

Date Written: July 05, 2023

Abstract

We study the many implications of the Eurosystem collateral framework for corporate bonds. Using data on the evolving collateral eligibility list, we identify the first inclusion dates of bonds and issuers and use these events to find that the increased supply and demand for pledgeable collateral following eligibility (a) increases activity in the corporate securities lending market, (b) lowers eligible bond yields, and (c) affects bond liquidity. Thus, corporate bond lending relaxes the constraint of limited collateral supply and thereby improves market functioning.

Keywords: Collateral policy, European Central Bank (ECB), Corporate bonds, Eligibility premium

JEL Classification: G12, G18, G28, E58

Suggested Citation

264068, 264068 and 1773767, 1773767 and 2205330, 2205330 and 738, 738, Collateral Eligibility of Corporate Debt in the Eurosystem (July 05, 2023). SAFE Working Paper No. 275, NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3586409 or http://dx.doi.org/10.2139/ssrn.3586409

264068 264068

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.safe-frankfurt.de

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

1773767 1773767

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

2205330 2205330 (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

738 738

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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