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Journal of Financial Economics Vol. 153 2024

Collateral eligibility of corporate debt in the Eurosystem

Loriana Pelizzon1,2; Max Riedel2; Zorka Simon2; Marti G. Subrahmanyam3

1 Ca' Foscari University of Venice · 2 Leibniz Institute for Financial Research SAFE · 3 New York University

open access

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.

DOI
10.1016/j.jfineco.2023.103777
Volume
153
Pages
103777
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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