Title: Tracing the impact of the ECB's expanded asset purchase programme on the yield curve
Authors: Fabian Eser - ECB (Germany)
Wolfgang Lemke - European Central Bank (Germany) [presenting]
Ken Nyholm - European Central Bank (Germany)
Soeren Radde - ECB (Germany)
Andreea Vladu - ECB (Germany)
Abstract: Since March 2015, the ECB has been purchasing public sector securities as part of its Expanded Asset Purchase Programme. The impact of those bond purchases on the term structure of euro area sovereign bond yields is quantified. The analysis deploys an estimated affine term structure model, in which central bank bond holdings compress term premia via a reduction of the market price of duration risk. We find that at the beginning of 2018 the stock of current and expected central bank bond holdings compressed ten-year term premia by about 100 basis points. The impact is persistent and expected to halve over around five years. The model is also utilised to quantify and interpret how modifications to the design of the purchase programme - such as changes in the re-investment policy - lead to changing yield impacts.