Investors that sell securities to the central bank can retain the proceeds of their sales on deposit or they may reallocate their portfolios towards other assets, for example corporate bonds and/or equity securities. Increased demand for relatively riskier assets drives up their prices and lowers their yields, leading to positive wealth effects for investors and reducing the borrowing costs of corporates.
Both increased wealth and compressed credit costs have the potential to improve the prospects for the real economy, by boosting spending and investment. The bank lending channel is also associated with central bank asset purchases.