Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 440: Quantitative Easing and the Supply of Safe Assets: Evidence from International Bond Safety Premia

Jens H. E. Christensen (), Nikola Mirkov () and Xin Zhang ()
Additional contact information
Jens H. E. Christensen: Federal Reserve Bank of San Francisco, Postal: 101 Market Street MS 1130, San Francisco,
Nikola Mirkov: Belgrade Banking Academy
Xin Zhang: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

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 structure modeling; convenience yields; unconventional monetary policy; European Central Bank

JEL-codes: E43; E47; F42; G12; G13

Language: English

40 pages, September 1, 2024

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