Credit Risk and Financial Regulations
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Abstract
Abstract
This article examines price discovery in euro investment-grade corporate bond issuance, where underwriters first tease investor demand with elevated initial spreads and then tighten pricing as orders build. The euro market provides a rare view into how this process changes when a central bank can join the order book. Using 4,196 euro-denominated benchmark corporate bonds issued from 2016 through 2023, we find that underwriters initially offered spreads about 22 basis points above final pricing, with larger tightening for riskier bonds, debut issuers, ESG bonds, and deals launched during market stress. When the European Central Bank appears to be present in the order book, underwriters tighten spreads by about 5 additional basis points, suggesting that actual and anticipated central bank demand affect the pricing process. The results show that central bank corporate bond purchases affect not only secondary market yields but also primary market price formation.
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@article{Matthaei2026Demand,
title = {ECB Demand and Price Discovery in Euro Corporate Bonds: Tease and Tighten in Primary Markets},
author = {Stephan Matthaei and Florian Kiesel and Dirk Schiereck},
journal = {The Journal of Fixed Income},
year = {2026},
doi = {10.3905/jfi.2026.022},
url = {https://doi.org/10.3905/jfi.2026.022}
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