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This article uses a novel way of identifying part of the impact of quantitative easing (QE) on gilt yields, using natural experiments associated with Bank of England announcements about changes in the maturity distribution of future gilt purchases. We find that changes in expected QE purchases had a significant effect on gilt yields following each announcement in

In August 2016, the Bank of England (BoE) announced a Corporate Bond Purchase Scheme (CBPS) to purchase up to £10bn of sterling corporate bonds. To investigate the impact of these purchases on liquidity, we create a novel dataset that combines transaction-level data from the secondary corporate bond market with proprietary offer-level data from the BoE's CBPS auctions. Identifying the impact of central bank asset purchases on liquidity is potentially impacted by reverse causality, because liquidity considerations might impact purchases. But the offer-level data allow us to construct proxy measures for the BoE's demand for bonds and auction participants' supply of bonds, meaning that we can control for the impact of liquidity on purchases. Across a range of liquidity measures, we find that CBPS purchases improved the liquidity of purchased bonds.

There is substantial uncertainty about the impact of quantitative easing (QE) on market liquidity. Identifying the impact is particularly challenging due to the potential for reverse causality, because liquidity considerations might affect QE purchases. We address this challenge by studying the Bank of England’s 2016-17 Corporate Bond Purchase Scheme (CBPS). In particular, we use granular offer-level data from the CBPS auctions to construct proxy measures for the BoE’s demand for bonds and auction participants’ supply of bonds, allowing us to control for any reverse causality from liquidity to purchases. We find that CBPS purchases improved the liquidity of purchased bonds.