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Contribution Details
| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Price pressure during central bank asset purchases |
| Organization Unit | |
| Authors |
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| Language |
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| Institution | University of Zurich |
| Series Name | - |
| Number | - |
| Abstract Text | Focusing on the QE program of the Eurosystem in the covered bond market, this study shows that yields of eligible and closely matched ineligible bonds diverge in response to central bank buying activity. The magnitude of this price pressure depends on the country of issuance and is not there in all euro area countries. In countries with high price pressure, banks issue abnormal amounts of bonds in the first two years after the start of the QE program, not before and not after. The source of price pressure is central bank buying activity as it is larger in countries with on average smaller bond sizes and its effect declines after persisting for 12 months as buying activity abates. These findings suggest mispricing between similar bonds is an important factor in explaining abnormal bond issuance during a QE program. |
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| Additional Information | Job Market Paper |