Government Bonds Ammunitions for the ECB Quantitative Easing

2015 ◽  
Author(s):  
Umberto Cherubini ◽  
Roberto Violi
Keyword(s):  
Quantitative Easing ◽  
Government Bonds

Adoption of yield-curve control could aid US recovery

2020 ◽  
Keyword(s):  
Interest Rates ◽  
Yield Curve ◽  
Balance Sheet ◽  
Quantitative Easing ◽  
Government Bonds ◽  
Content Type ◽  
Forward Guidance ◽  
Reserve Bank ◽  
The Us

Subject Yield-curve control. Significance The US Federal Reserve (Fed) is contemplating yield-curve control (YCC), a policy pursued by the Bank of Japan (BoJ) and Reserve Bank of Australia (RBA) alongside quantitative easing (QE) and forward guidance. A central bank does this by capping the yields on government bonds of a chosen maturity through unlimited bond purchases. This supports the economy by reducing borrowing costs for financial institutions, households and businesses. Impacts By providing transparency over a central bank’s actions, YCC would be likely to reduce the volatility of long-term interest rates. YCC adds to the Fed balance sheet; the Fed will need a credible exit strategy to cut market volatility and the risk of Fed capital losses. A sharp uptick in inflation may put upward pressure on long-term yields, necessitating higher Fed purchases to maintain its targeted peg.

Euro-Area Quantitative Easing and Portfolio Rebalancing

2017 ◽  
Vol 107 (5) ◽  
pp. 621-627 ◽  
Author(s):  
Ralph S. J. Koijen ◽  
François Koulischer ◽  
Benoît Nguyen ◽  
Motohiro Yogo
Keyword(s):  
Mutual Funds ◽  
Euro Area ◽  
Home Bias ◽  
Pension Funds ◽  
Insurance Companies ◽  
Quantitative Easing ◽  
Government Bonds ◽  
Foreign Investors ◽  
Portfolio Rebalancing ◽  
Comprehensive Data

We use new and comprehensive data on the security holdings of euro-area investors to document facts about the ongoing quantitative easing program. The holdings of purchase-eligible government bonds have strong home bias not only for banks but also for insurance companies, pension funds, and mutual funds, especially in the vulnerable countries. In response to the program, foreign investors sold most of the purchase-eligible government bonds. Banks also sold purchase-eligible government bonds to a lesser extent, but insurance companies and pension funds bought them. Thus, quantitative easing may have reduced the duration mismatch for these institutions.

scholarly journals Budget and Tax Policy and the Public Debt Market in the First Half of 2020

Federalism ◽  
2020 ◽  
pp. 169-187
Author(s):  
I. S. Bukina
Keyword(s):  
Public Debt ◽  
Quantitative Easing ◽  
Monetary Policies ◽  
Government Bonds ◽  
The Public ◽  
Debt Burden ◽  
Russian Economy ◽  
Debt Market ◽  
Coronavirus Infection ◽  
Restrictive Measures

The pandemic of a new coronavirus infection for the Russian economy was a double shock: against the background of the spread of COVID-19, oil prices fell sharply. This was a serious shock for the economy and budget revenues. However, it was the budget expenditures that played a major role in supporting output. In addition, monetary policy was expansionary. Thus, in the first half of 2020, a combination of stimulating fiscal and expansionary monetary policies was observed. This combination increased the demand for government bonds. During the periods of the next decrease in the key rate of the Central Bank, an increase in the yield of OFZ was observed. Despite the fact that the level of Russia’s debt burden is low, there are specific risks that limit the possibilities for increasing debt. These include possible sanctions, a weakening of the ruble, falling incomes of the households and a high probability of an increase in bankruptcies of those organizations that will not be able to survive the consequences of the introduction of restrictive measures. Given these risks, it is necessary to consider mechanisms to support the economy using debt instruments and quantitative easing policies.

Quantitative easing and government bonds: evidence from the EU

2018 ◽  
Vol 3 (1) ◽  
pp. 79
Author(s):  
Fotios Mitropoulos ◽  
Konstantinos Kollias ◽  
Antonios Sarantidis
Keyword(s):  
Quantitative Easing ◽  
Government Bonds ◽  
The Eu

Fed tightening deepens monetary policy rifts worldwide

2017 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Oil Prices ◽  
Inflation Expectations ◽  
Bond Markets ◽  
Quantitative Easing ◽  
Government Bonds ◽  
Content Type ◽  
Political Risks ◽  
Bank Of England

Subject US tightening continued this month despite lower inflation expectations. Significance Monetary policy rifts have deepened since the decision by the Federal Reserve (Fed) on June 14 to raise interest rates for the second time this year despite inflation easing and oil prices falling below 45 dollars per barrel. Growing discord between central banks and bond markets has spread to the Bank of England (BoE), where three of the eight committee members disagreed with the June 15 decision to keep rates on hold despite inflation spiking to its highest since June 2013. The ECB and the Bank of Japan (BoJ) are also under pressure to set out plans to wind down their quantitative easing (QE) programmes. Impacts ‘Reflation trading’ continues to unwind; the world stock of negative-yielding government bonds has surged to nearly 10 trillion dollars. US equity markets are hovering near records despite a plethora of vulnerabilities, including lower oil prices and rising political risks. Emerging markets (EM) inflows continue to surge, but higher US rates may force EMs to raise rates before they are ready, hitting activity. The divergence between rising US rates and ultra-loose ECB and BoJ policy will cushion the dollar, protecting it from rising US risks.

scholarly journals The True Nature of the Portfolio Balance Channel of Quantitative Easing Policy

2019 ◽  
Vol 19 (2) ◽  
pp. 95-117
Author(s):  
Jakub Jakl
Keyword(s):  
Asset Markets ◽  
Counterfactual Analysis ◽  
Quantitative Easing ◽  
Government Bonds ◽  
True Nature ◽  
Portfolio Balance ◽  
Data Regression ◽  
Bond Portfolios ◽  
Asset Classes ◽  
Direct Change

Abstract This paper analyses the effects of the ECB´s Public sector purchase programme (PSPP) on portfolios of the Eurozone investors. The ECB claims that the PSPP works mainly through the portfolio balance channel when the conditions on the asset markets are changed by the presence of a bidding central bank and investors are under those conditions forced to reallocate their portfolio to the state that better corresponds to ECB-changed market conditions and their preferences. This paper incorporates counterfactual analysis approach rather than analysis of direct change of prices and yields of given assets and uses sectoral data regression analysis of asset holdings of different investors in the Eurozone. This study addresses questions regarding size and direction of investors’ reallocations – what types of investors were acting as the main counterparts to the ECB on the market for government bonds and what asset classes were preferred and chosen as an alternative by investors in the Eurozone to reallocate their funds. The series of obtained regression estimates and counterfactual analysis graphic representation answers to questions mentioned above and identifies a nonnegligible effect of the PSPP on the rebalancing of government bond portfolios towards riskier corporate bonds and equities across investor types in major Eurozone countries.

Quantitative easing and government bonds: evidence from the EU

2019 ◽  
Vol 3 (1) ◽  
pp. 79 ◽  
Author(s):  
Antonios Sarantidis ◽  
Fotios Mitropoulos ◽  
Konstantinos Kollias
Keyword(s):  
Quantitative Easing ◽  
Government Bonds ◽  
The Eu

scholarly journals TARGET2 imbalances: causes, assessments and consequences

2020 ◽  
Vol 15 (1) ◽  
pp. 107-117
Author(s):  
Michael Menrad
Keyword(s):  
Central Bank ◽  
Euro Area ◽  
Central Banks ◽  
Inflation Expectations ◽  
Problem Solution ◽  
Quantitative Easing ◽  
Government Bonds ◽  
European Central ◽  
Critical Situation ◽  
Market Intervention

This research aims to enrich the literature on the threatening topic of Target2 imbalances in the euro area. Using a quantitative time series analysis, the paper examines and discusses the development of Target2 imbalances and the interrelationships of the European Central Bank (ECB) activities through market intervention using quantitative easing. This paper outlines the scope of central bank activities in different Eurozone countries and examines how individual debtor and creditor countries, as well as central banks, will continue to operate. In this context it examines whether the ECB is working on a problem solution, and what are the risks posed by Target2 imbalances for the euro area, as well as whether the euro is volatile and how the Target2 imbalances will be managed if the euro breaks. This research highlights the ambiguity of central bank activities, explains the burdens and risks of Germany as the largest creditor, shows solutions through the communitization or the creation of Target3 to correct past mistakes and to prevent a further and more severe global crisis. Attention is drawn to the fact that Italy could put the Eurozone in a critical situation by introducing mini-BOTs (small government bonds; “titoli di Stato di piccolo taglio”) as the second currency. Furthermore, it is pointed out that the ECB has adjusted its price stability objectives to raise inflation expectations in the Eurozone, which is unlikely to satisfy Target2 demanding countries.

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