EconPapers    
Economics at your fingertips  
 

The effect of Eurosystem asset purchase programmes on euro area sovereign bond yields during the COVID-19 pandemic

George Hondroyiannis and Dimitrios Papaoikonomou

No 291, Working Papers from Bank of Greece

Abstract: We investigate the effect of Eurosystem Asset Purchase Programmes (APP) on the monthly yields of 10-year sovereign bonds for 11 euro area sovereigns during January-December 2020. The analysis is based on time-varying coefficient methods applied to monthly panel data covering the period 2004m09 to 2020m12. During 2020 APP contributed to an average decline in yields estimated in the range of 58-76 bps. In December 2020 the effect per EUR trillion ranged between 34 bps in Germany and 159 bps in Greece. Stronger effects generally display diminishing returns. Our findings suggest that a sharp decline in the size of the APP in the aftermath of the COVID-19 crisis could lead to very sharp increases in bond yields, particularly in peripheral countries. The analysis additionally reveals a differential response to global risks between core and peripheral countries, with the former enjoying safe-haven benefits. Markets’ perceptions of risk are found to be significantly affected by credit ratings, which is in line with recent evidence based on constant parameter methods.

Keywords: Euro area; asset purchase programmes; sovereign bond yields; time-varying parameters. (search for similar items in EconPapers)
JEL-codes: C33 E44 E52 E58 F34 G15 (search for similar items in EconPapers)
Pages: 43
Date: 2021-07
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-isf, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.bankofgreece.gr/Publications/Paper2021291.pdf Full Text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Journal Article: The effect of Eurosystem asset purchase programmes on euro area sovereign bond yields during the COVID-19 pandemic (2022) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bog:wpaper:291

Access Statistics for this paper

More papers in Working Papers from Bank of Greece Contact information at EDIRC.
Bibliographic data for series maintained by Anastasios Rizos ().

 
Page updated 2025-03-22
Handle: RePEc:bog:wpaper:291