Quantitative easing and preferred habitat investors in the euro area bond market

Martijn Boermans, Tomás Carrera de Souza and Robert Vermeulen

Working Papers from DNB

Abstract: In this study, we analyze the impact of the European Central Bank’s (ECB) sovereign bond purchases on bond demand among euro area investors from 2015 to 2022. By employing a novel demand setup, using ownership shares of individual bonds, we separately estimate investor reactions to (i) ECB bond purchases and (ii) new bond issuances. Utilizing bond level data on securities holdings of euro area investors and the ECB, we show that insurance companies and pension funds act as preferred habitat investors and are reluctant to sell the bonds the ECB is buying. Conversely, non-euro area investors from the private sector primarily serve as counterparties for ECB purchases. Our findings indicate significant differences across bond maturities and credit ratings, but minimal differences across the different stages of the quantitative easing (QE) implementation periods and between domestic and non-domestic euro area bonds.

Keywords: quantitative easing; sovereign bonds; European Central Bank; PSPP; securities holdings statistics; bond demand (search for similar items in EconPapers)
JEL-codes: E58 F42 G11 G15 (search for similar items in EconPapers)
Date: 2025-01
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:826

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