The impact of ECB crisis measures on euro-area CDS spreads

This paper studies euro-area CDS spreads during the financial crisis with the aim of discovering which of the ECB's open-market operations reduced bank and government spreads. After controlling for potential contagion across the financial system, it is found that effects vary across operations. Purchases under the Covered Bond Purchase Programme seem to have reduced spreads, as did the announcement of the SecuritiesMarket Programme. Actual SMP purchases, however, appear to have raised spreads, perhaps because markets took them as a sign of policymaker concern about the financial system. The same is true for the announcement of the 3-year repos.