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Portfolio balance effects of the SNB’s bond purchase program


Kettemann, Andreas; Krogstrup, Signe (2013). Portfolio balance effects of the SNB’s bond purchase program. Working paper series / Department of Economics 116, University of Zurich.

Abstract

This paper carries out an empirical investigation of the impact on bond spreads of the announcement, purchases and exit from the SNB’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 SNB’s intention to buy bonds issued by private sector borrowers, as markets learned that the SNB was buying covered bonds. 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 signalling. In contrast, we find no evidence of a further effect of the actual purchases and subsequent sales on bond spreads.

Abstract

This paper carries out an empirical investigation of the impact on bond spreads of the announcement, purchases and exit from the SNB’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 SNB’s intention to buy bonds issued by private sector borrowers, as markets learned that the SNB was buying covered bonds. 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 signalling. 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:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:E5, G1
Uncontrolled Keywords:Portfolio balance, credit spread, corporate spread, unconventional monetary policy, central bank asset purchases, credit easing, zero lower bound
Language:English
Date:March 2013
Deposited On:19 Mar 2013 13:35
Last Modified:06 Apr 2017 12:13
Series Name:Working paper series / Department of Economics
Number of Pages:38
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/static/wp/econwp116.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php
http://www.zora.uzh.ch/98907/

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