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Portfolio balance effects of the Swiss National Bank’s bond purchase program


Kettemann, Andreas; Krogstrup, Signe (2014). Portfolio balance effects of the Swiss National Bank’s bond purchase program. Journal of Macroeconomics, 40:132-149.

Abstract

This paper carries out an empirical investigation of the impact on bond spreads of the announcement, purchases and exit from the Swiss National Bank’s bond purchase program in 2009–2010. We find evidence in favor of a narrowing yield spread of covered bonds as a result of the program. The effect materialized in the days following the announcement of the Swiss National Bank’s intention to buy bonds issued by private sector borrowers, as markets learned that covered bonds were being bought. The specification of the bond spreads used allows us to identify this effect as a discounted portfolio balance effect of the expected purchases, as distinct from policy signaling. In contrast, we find no evidence of a further effect of the actual purchases and subsequent sales on bond spreads.

This paper carries out an empirical investigation of the impact on bond spreads of the announcement, purchases and exit from the Swiss National Bank’s bond purchase program in 2009–2010. We find evidence in favor of a narrowing yield spread of covered bonds as a result of the program. The effect materialized in the days following the announcement of the Swiss National Bank’s intention to buy bonds issued by private sector borrowers, as markets learned that covered bonds were being bought. The specification of the bond spreads used allows us to identify this effect as a discounted portfolio balance effect of the expected purchases, as distinct from policy signaling. In contrast, we find no evidence of a further effect of the actual purchases and subsequent sales on bond spreads.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:June 2014
Deposited On:23 Sep 2014 12:50
Last Modified:05 Apr 2016 18:23
Publisher:Elsevier
ISSN:0164-0704
Publisher DOI:https://doi.org/10.1016/j.jmacro.2014.03.005
Related URLs:http://www.zora.uzh.ch/76690/
Permanent URL: https://doi.org/10.5167/uzh-98907

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