With economic activity severely disrupted by the coronavirus crisis, many governments have been supporting peoples’ incomes and keeping businesses alive by means of income support programmes financed by borrowing. This paper describes how the borrowing is being done in the United States and the United Kingdom, and how central banks are in practice managing not just short-term interest rates but also yields on government bonds.

Keywords: Central bank operations, government bonds.

JEL classifications: E52, E58.

Acknowledgements

This paper was written in close collaboration with Richhild Moessner of CESifo, to whom I am extremely grateful. The views expressed are those of the author and should not be taken to reflect those of the National Institute for Economic and Social Research.