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Do Fed TIPS purchases affect market liquidity?

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  • Jens Christensen
  • James Gillan

Abstract

The second round of Federal Reserve large-scale asset purchases, from November 2010 to June 2011, included regular purchases of Treasury inflation-protected securities, or TIPS. An analysis of liquidity premiums indicates that the functioning of the TIPS market and the related inflation swap market improved both on the days the Fed purchased TIPS and over the course of the LSAP program. Thus, TIPS purchases had liquidity benefits beyond the effect they may have had in reducing Treasury yields.

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File URL: http://www.frbsf.org/publications/economics/letter/2012/el2012-07.html
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File URL: http://www.frbsf.org/publications/economics/letter/2012/el2012-07.pdf
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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal FRBSF Economic Letter.

Volume (Year): (2012)
Issue (Month): mar5 ()
Pages:

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Handle: RePEc:fip:fedfel:y:2012:i:mar5:n:2012-07

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Keywords: Inflation (Finance) ; Inflation-indexed bonds - United States ; Liquidity (Economics);

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  1. James D. Hamilton & Jing Cynthia Wu, 2011. "The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment," NBER Working Papers 16956, National Bureau of Economic Research, Inc.
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