Market Effects of Central Bank Credit Markets Support Programs in Europe^a

Abstract Using responses of credit default swap indices to European Central Bank (ECB) monetary policy announcements, we isolate a novel credit policy component of monetary policy surprises. We examine how such unconventional monetary policy surprises affect asset markets. Easing credit surprises lead to a somewhat delayed decline in corporate‐bond yields and cause declines in option‐implied measures of uncertainty about credit risk. Easing credit surprises also boost equity markets. Both net and gross corporate‐bond issuance increase as a result of easing credit surprises, with the largest response in investment grade issuance.