The yield curve impact of government debt issuance surprises and the implications for QT

Michael Joyce () and Andras Lengyel
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Michael Joyce: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 1097, Bank of England working papers from Bank of England

Abstract: We analyse the market reaction of yields to UK government debt auction announcements to quantify the potential impact of quantitative tightening (QT) by the Bank of England. Our results suggest that the yield reaction to debt issuance surprises comes through both duration risk and local supply channels, and depends critically on the level of market stress. Based on these estimates, a fully unanticipated announcement that mimics the Bank’s first annual QT programme would raise 10-year yields by 20 basis points under low market stress, with the impact from passive unwind broadly equivalent to that from active sales.

Keywords: Yield curve; government debt auctions; quantitative easing; quantitative tightening (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 G12 G14 G18 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2024-11-15
New Economics Papers: this item is included in nep-cba and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:1097

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