asset purchases

Effects of asset purchases and financial stability measures on term premia in the euro area

We study the effects of the announcements of ECB asset purchases and of financial stability measures in the euro area in the wake of the global financial crisis and the euro area sovereign debt crisis on ten-year government bond term premia in eleven euro area countries. We find that the term premia of euro area countries with higher sovereign risk, as measured by sovereign CDS spreads, decreased more in response to the announcements of asset purchases and financial stability measures.

The transmission of unconventional monetary policy in UK debt markets

Through its quantitative easing programme the Bank of England has looked to manage the supply of nominal UK government securities in order to lower interest rates. In doing so it has removed more than 25 per cent of the overall supply of those securities from the publicly accessible market. The benchmark New Keynesian model suggests this should only have an impact on interest rates insofar as it affects expectations of future policy rates, whilst alternative theoretical frameworks imply a direct effect of changes in supply onto yields.