Euro area sovereign bond market liquidity since the start of the PSPP

Linas Jurkšas, Daniel Kapp, Ken Nyholm and Julian von Landesberger

Economic Bulletin Boxes, 2018, vol. 2

Abstract: The liquidity of euro area sovereign bond markets is important for the transmission of the ECB’s monetary policy. In particular, a high degree of liquidity fosters the link between the ECB’s monetary policy decisions, the yield curve, financial asset prices in general, and the overall cost and flow of finance in the economy. The liquidity of sovereign bond markets needs to be monitored more closely since the implementation of the ECB’s public sector purchase programme (PSPP), under which a significant share of outstanding euro area sovereign bonds has been bought. Against this background, this box presents some of the market liquidity indicators that the ECB monitors regularly. Overall, the indicators suggest that liquidity conditions in sovereign bond markets have not deteriorated since the start of the PSPP (on 9 March 2015). JEL Classification: E52, G12, G14

Keywords: asset pricing; general financial markets; monetary policy (search for similar items in EconPapers)
Date: 2018-03
Note: 1884807
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