Using Changes in Auction Maturity Sectors to Help Identify the Impact of QE on Gilt Yields

McLaren, Nick; Banerjee, Ryan Niladri; Latto, David

doi:10.1111/ecoj.12141

Cited by 48 publications

(26 citation statements)

References 16 publications

(24 reference statements)

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“…35 However, for our study, which focuses on a period defined by short-term 33 E.g. McLaren et al (2014). To circumvent this issue, many studies on UMP effects focus exclusively on the early rounds of UMP announcements, such as the UK QE1 or Fed LSAP1 programmes, arguing that these announcements can confidently be assumed to be fully surprising, see, e.g., Gagnon et al (2011) or Joyce et al (2011).…”

Section: Baseline Surprise Measure: Change In Long-term Bond Futuresmentioning

confidence: 99%

Cross-border spillover effects of unconventional monetary policies on Swiss asset prices

Bernhard

Ebner

2017

Journal of International Money and Finance

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used (reproduced, used via the internet, etc.) for non-commercial purposes and provided that the source is mentioned. Their use for commercial purposes is only permitted with the prior express consent of the SNB. General information and data published without reference to a copyright may be used without mentioning the source. To the extent that the information and data clearly derive from outside sources, the users of such information and data are obliged to respect any existing copyrights and to obtain the right of use from the relevant outside source themselves. limitation of liability The SNB accepts no responsibility for any information it provides. Under no circumstances will it accept any liability for losses or damage which may result from the use of such information. This limitation of liability applies, in particular, to the topicality, accu− racy, validity and availability of the information.

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Section: Baseline Surprise Measure: Change In Long-term Bond Futuresmentioning

confidence: 99%

Cross-border spillover effects of unconventional monetary policies on Swiss asset prices

Bernhard

Ebner

2017

Journal of International Money and Finance

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“…The impact of quantitative easing is typically estimated through the impact the amounts of purchases have on the term premium of yields (through a reduction in supply of assets), see e.g. Gagnon, Raskin, Remache and Sack (2011); D'Amico and King (2013); McLaren, Banerjee and Latto (2014). QE can also affect the expectations component of the yields through the signalling channel Bauer and Rudebusch (2014), from which we abstract here.…”

Section: Introductionmentioning

confidence: 99%

Quantitative Easing and the Price-Liquidity Trade-Off

2017

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We present a search theoretic model of over-the-counter debt with quantitative easing (QE). The impact of central bank asset purchases on yields depend on market tightness, which is determined by shares of preferred habitat investors. The model predicts that the impact of government bond purchases is higher in countries with a higher share of preferred habitat investors. Furthermore, there is a trade-off with liquidity, which is not present in other models of QE. We present a new index for the share of preferred habitat investors holding government bonds in Eurozone countries, based on the ECB's securities and holdings statistics, which we use to match the impact of QE on the observed yield changes in data and to test our model.

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“…Key insights have also been gleaned from studies on unconventional polices by other major central banks. Joyce, Lasaosa, Stevens, and Tong (2011), Tong (2012), andMcLaren et al (2014) find a significant impact of the Bank of England's quantitative easing policies on Gilt prices. Krishnamurthy, Nagel, and Vissing-Jorgensen (2015) study the impact of ECB's unconventional policies (LTROs, SMP, OMT) based on an event study approach, aimed at quantifying the contribution of various transmission channels.…”

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confidence: 99%

“…Yet, as QE policies over time became more widely accepted as part of the central banking toolkit and became more widespread, the surprise element of QE-related announcement may have dissipated (e.g. Meaning and Zhu, 2011;McLaren, Banerjee, and Latto, 2014). It seems fair to say, that expectations of further policy action were increasingly priced in by market participants, attenuating the impact of the news at the time of the actual policy announcement.…”

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confidence: 99%

Scarcity Effects of QE: A Transaction-Level Analysis in the Bund Market

et al. 2017

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This paper investigates the impact of the ECB/Eurosystem's Public Sector Purchase Program (PSPP) on prices and liquidity of German Treasury securities, in short Bunds. Our focus is on the scarcity effects of the asset purchases and possible market distortions. ContributionThis is the first study that matches high-frequency data on official-sector asset purchases with high-frequency inter-dealer sovereign bond data. This enables a precise identification of the intra-day impact of bond purchases via scarcity effects. Due to the presence of a large unidirectional buyer, potential demand-supply imbalances may arise. The impact of such imbalances on the market functioning, especially liquidity provision, are studied in detail. ResultsThe results of this study show significant and positive price impacts of PSPP purchases on Bunds, both at the minute and daily frequencies. This highlights the importance of scarcity in bond markets. These intended price effects are not without side effects. We find that large-scale asset purchases affect liquidity conditions in the Bund market. Standard liquidity measures such as bid-ask spreads and order book depth suggest a decline in market quality. We further show that price impacts depend on market conditions. They are substantially higher in times of market stress and during episodes of high yields, when the demand for government bonds is suppressed. This paper investigates the scarcity effects of quantitative easing (QE) policies, drawing on intra-day transaction-level data for German government bonds, purchased under the Public Sector Purchase Program (PSPP) of the ECB/Eurosystem. This paper is the first to match high-frequency QE purchase data with high-frequency inter-dealer data. We find economically significant price impacts at high (minuteby-minute) and low (daily) frequencies, highlighting the relevance of scarcity effects in bond markets. Asset purchase policies are not without side effects, though, as the induced scarcity has an adverse impact on liquidity conditions as measured by bid-ask spreads and inter-dealer order book depth. We further show that the price impact varies greatly with market conditions: it is considerably higher during episodes of illiquidity and when yields are higher.

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Using Changes in Auction Maturity Sectors to Help Identify the Impact of QE on Gilt Yields

Cited by 48 publications

References 16 publications

Cross-border spillover effects of unconventional monetary policies on Swiss asset prices

Cross-border spillover effects of unconventional monetary policies on Swiss asset prices

Quantitative Easing and the Price-Liquidity Trade-Off

Scarcity Effects of QE: A Transaction-Level Analysis in the Bund Market

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