CEGE - Working Papers / Preprints
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Browsing CEGE - Working Papers / Preprints by Subject "Asset purchase programmes"
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- Are covered bonds different from securitization bonds?Publication . Pinto, João; Correia, MafaldaUsing a sample of 18,309 bonds issued by European banks, we show that although ratings are the most important pricing determinant for ABS and MBS, investors place relatively more importance on contractual, macroeconomic, and banks’ characteristics rather than ratings in pricing covered bonds. We find evidence of a mispricing effect in structured finance markets: ABS and MBS have higher credit spreads than similarly rated public covered bonds (PCB) and mortgage covered bonds (MCB), and security prices reflect information beyond credit ratings across asset classes. We find no evidence of borrowing costs affecting the banks’ choice between securitization and covered bonds.
- The pricing of bank bonds, sovereign credit risk and ECB’s asset purchase programmesPublication . Pinto, João; Ribeiro, Ricardo; Branco, RicardoThe 2008 Global financial crisis and the subsequent European sovereign debt crisis deteriorated banks funding conditions and lead to a substitution effect among bond instruments. We examine the pricing of straight, covered and securitization bonds issued by European banks in the 2000-2016 period, with a particular focus on the effect of sovereign credit risk and ECB’s asset purchase programmes on spreads. We find that (i) straight, covered and securitization bonds are priced in segmented markets, (ii) the impact of common pricing determinants on spreads differ significantly between non-crisis and crisis periods, (iii) sovereign credit risk is an important determinant of banks’ cost of funding, especially in crisis periods, (iv) ECB’s asset purchase programmes exhibited mixed effectiveness in improving banks funding conditions, (v) contractual bond characteristics other than credit ratings, macroeconomic factors and bank characteristics are important determinants of spreads, and (vi) there is evidence of heterogeneity across countries.