It feels good to be CSPP’d

That’s the ECB’s corporate sector purchase programme (CSPP), of course, which is having what looks to be an easy-to-spot effect on the cost of borrowing for those lucky enough to be inside the fold.

From Citi:

And here’s CreditSights:

Tomas Hirst at CreditSights does make the valid point that “we do not know when the bonds were bought and so cannot say that the outperformance is a result of the ECB purchases themselves” but it’s hard not to be drawn towards that conclusion nonetheless.

It’s similar to how hard it was not to gawp at the presumably CSPP-influenced news that “Deutsche Bahn has become the first non-financial company to issue debt with a negative yield”. You want to resist a bit since per Deutsche, it “is 100% state-owned” but you have also to agree with them that it showed “the power of ECB bond buying at government and corporate level”.

Either way, those corporates making up the darker lines in Citi’s charts above will presumably also want to experience that power. Even if we can’t 100 per cent say the outperformance was down to the ECB, those companies probably wouldn’t say no to some central bank bond buying.

As Citi say:

Despite the fact that only 4% of CSPP purchases as of June 30th have taken place in primary, the ECB has in fact bought all of the eligible new issues (i.e. those that both meet the CSPP criteria and are not issued by “public undertakings”) that have appeared on the ECB collateral list since the programme was launched.

Figure 4 shows the performance of the CSPP-eligible bonds that the ECB has already bought against the rest of our CSPP-eligible universe. The former have tightened by 34% since CSPP purchases began – 7% more than the rest of the CSPP-eligible universe. In spread terms, the bonds bought by the ECB thus far were already slightly tighter on average, with a duration and notional-weighted average of 66bp on June 7th (the day before the CSPP began), versus 70bp for the rest of the CSPP-eligible universe…

In the table below, we list all the companies whose bonds appear on our CSPP-eligible list but have not yet been bought by the ECB. While we are less convinced about the continued outperformance of CSPP-eligible vs ineligible bonds going forward, within the eligible space we think that the outperformance will likely be most accentuated in the names that appear on this list.

Do click to enlarge and there’s more in the usual place.

Related link:
The ECB’s momentous step into corporate asset purchases – FT Alphaville
Corporate bond yields and the cold pull of negativity – FT Alphaville
Corp bonds join negative yield club – FT
In ten years times, what will we think about negative yields? – Weldon Medium