The COVID Pandemic in the Market : Infected, Immune and Cured Bonds

By focusing on the cost conditions at issuance, I find that not only the Covid-19 pandemic effects were different across bonds and firms at different stages, but also that the market composition was significantly affected, collapsing on investment-grade bonds, a segment in which the share of bonds eligible to the ECB corporate programmes strikingly increased from 15% to 40%. Contemporaneously, the high-yield segment shrunk to almost disappear at 4%. Another source of risk detected in the pricing mechanism is the weak resilience to pandemic: the premium requested is around 30 bp and started to be priced only after the early containment actions taken by the national authorities. On the contrary, I do not find evidence supporting an increased risk for corporations headquartered in countries with a reduced fiscal space, nor the existence of a premium in favour of green bonds, which should be the backbone of a possible “green recovery”