QE and the gilt market: a disaggregated analysis
AbstractWe examine the impact of the first phase of the Bank of England’s quantitative easing (QE) programme during March 2009 to January 2010 on the UK government bond (gilt) market, using high-frequency disaggregated data on individual gilts. We find that: QE announcements took varying amounts of time to get incorporated into market prices and had significant effects on the shape of the term structure; the Bank’s reverse auctions were initially associated with additional yield reductions on gilts both eligible and ineligible for purchase; and, allowing for fiscal news and the changing macroeconomic outlook, QE appears to have had persistent effects on gilt yields. In general, our results provide evidence of local supply and duration risk effects consistent with imperfect asset substitution, which has implications beyond the financial crisis for how we think about price determination in the gilt market.
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Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 466.
Length: 46 pages
Date of creation: 26 Oct 2012
Date of revision:
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More information through EDIRC
QE; asset purchases; gilt market; auctions;
Other versions of this item:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-03 (All new papers)
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