New Findings on Investment Described by Investigators at Federal Reserve Bank (Exorbitant Privilege? Quantitative Easing and the Bond Market Subsidy of Prospective Fallen Angels): Investment

2025 JUL 01 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- A new study on Investment is now available. According to news reporting originating in New York City, New York, by NewsRx journalists, research stated, “We document capital misallocation in the U.S. investment-grade (IG) corporate bond market, driven by quantitative easing (QE).”

The news reporters obtained a quote from the research from Federal Reserve Bank, “Prospective fallen angels - risky firms just above the IG cutoff - enjoyed subsidized bond financing in 2009-19. This effect is driven by Fed purchases of securities inducing long-duration IGfocused investors to rebalance their portfolios towards higher-yielding IG bonds.”

According to the news reporters, the research concluded: “The benefiting firms (i) exploited the sluggish downward adjustment of credit ratings after M&A to finance risky acquisitions with bond issuances, and (ii) increased market share affecting competitors’ employment and investment, but (iii) suffered severe downgrades at the onset of the pandemic.”

This research has been peer-reviewed.

For more information on this research see: Exorbitant Privilege? Quantitative Easing and the Bond Market Subsidy of Prospective Fallen Angels. Journal of Financial Economics, 2025;170. Journal of Financial Economics can be contacted at: Elsevier Science Sa, PO Box 564, 1001 Lausanne, Switzerland. (Elsevier - www.elsevier.com; Journal of Financial Economics - http://www.journals.elsevier.com/journal-of-financial-economics/)

Our news correspondents report that additional information may be obtained by contacting Matteo Crosignani, Federal Reserve Bank, Res & Stat Grp, 33 Liberty St, New York, NY 10025, United States. Additional authors for this research include Viral V. Acharya, Ryan Banerjee, Tim Eisert and Renee Spigt.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jfineco.2025.104084. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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