Quantitative Easing and Safe Asset Scarcity: Evidence from International Bond Safety Premia

Jens Christensen, Nikola Mirkov and Xin Zhang

No 2023-23, Working Paper Series from Federal Reserve Bank of San Francisco

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. This points to an important international spillover channel of QE programs to bond safety premia that operates by increasing the amount of truly safe assets.

Keywords: term structures; convenience yields; Conventional and unconventional US monetary policy; European Central Bank (ECB) (search for similar items in EconPapers)
JEL-codes: E43 E47 E58 F42 G12 G13 G15 (search for similar items in EconPapers)
Pages: 34
Date: 2024-06-18
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mon
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DOI: 10.24148/wp2023-23

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