The Bank of England published Staff Working Paper No. 1,134 analysing how its quantitative easing (QE) transmitted to the real economy through the UK corporate bond market between 2009 and 2021. The authors find that QE reduced borrowing costs for investment-grade, longer-maturity corporate bonds and was associated with higher issuance, but the additional funding was mainly used for share buybacks and reducing bank borrowing rather than increasing real investment. Using difference-in-differences tests on secondary-market yields and primary-market yields at issuance, the paper reports that investment-grade longer-maturity bonds saw the largest fall in yields at origination, alongside a relative increase in issuance amounts for these bonds. It also separates the marginal impact of purchases under the Corporate Bond Purchase Scheme (CBPS) from QE’s broader portfolio-rebalancing effects, finding eligible bonds’ secondary-market yields fell by 40–60 basis points relative to ineligible bonds, but this did not translate into a lower cost of borrowing or higher issuance in the primary market. The Bank reiterates that staff working papers present research in progress to elicit comment and debate and do not represent Bank of England policy.
Bank of England 2025-07-04
Bank of England working paper finds QE lowered investment-grade bond borrowing costs and boosted issuance while corporates favoured buybacks over investment
The Bank of England's Staff Working Paper No. 1,134 examines QE's impact on the UK corporate bond market from 2009 to 2021, finding reduced borrowing costs for investment-grade, longer-maturity bonds and increased issuance. However, the additional funding was mainly used for share buybacks and reducing bank borrowing rather than real investment. Eligible bonds under the Corporate Bond Purchase Scheme saw significant yield reductions, but this did not lead to lower borrowing costs or increased primary market issuance.