Quantitative easing and the supply of safe assets: Evidence from international bond safety premia

Jens H.E. Christensen, Nikola N. Mirkov and Xin Zhang

Journal of International Economics, 2025, vol. 157, issue C

Abstract: Through large-scale asset purchases, widely known as quantitative easing (QE), central banks around the world have affected the supply of safe assets by buying quasi-safe bonds in exchange for truly safe reserves. We examine the pricing effects of the European Central Bank’s bond purchases in the 2015–2021 period on an international panel of bond safety premia from four highly rated countries: Denmark, Germany, Sweden, and Switzerland. We find statistically significant negative effects for all four countries, highlighting an international spillover channel through which QE programs reduce bond safety premia by expanding the supply of truly safe assets.

Keywords: Term structure modeling; Convenience yields; Unconventional monetary policy; European central bank (search for similar items in EconPapers)
JEL-codes: E43 E47 E58 F42 G12 G13 G15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:157:y:2025:i:c:s0022199625001035

DOI: 10.1016/j.jinteco.2025.104146

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