This study explores the influence of chief executive officer (CEO) overconfidence on acquirer bondholder wealth in mergers from 1994 to 2014. We find that CEO overconfidence benefits acquirer bondholders. Overconfident CEOs are likely to choose targets with lower return correlations rather than targets with lower risk than acquirers. We further show stronger positive wealth effects when overconfident acquirers merge with targets that are less correlated. Overall, the coinsurance effect dominates the liquidity effect on overconfident acquirer bondholder wealth during a merger.