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ECB Interventions in Distressed Sovereign Debt Markets: The Case of Greek Bonds

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  • Christoph Trebesch

    ()

  • Jeromin Zettelmeyer

Abstract

This paper analyses the determinants and effects of ECB interventions in times of severe distress. We focus on the Greek government bond market in mid-2010 and use a unique new dataset to show, for the first time, what type of bonds the ECB bought. We then explore the short-term effects of ECB purchases at the bond-level. The results show a large impact of the interventions on the targeted instruments. Bonds bought by the ECB see a much steeper drop in yields than those not bought. This is consistent with theories of “local supply effects” in segmented or illiquid bond markets.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2014/wp-cesifo-2014-03/cesifo1_wp4731.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4731.

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Date of creation: 2014
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Handle: RePEc:ces:ceswps:_4731

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Related research

Keywords: central bank; asset purchases; securities markets programme; Eurozone crisis; sovereign risk; market segmentation;

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  1. D'Amico, Stefania & English, William & López-Salido, J David & Nelson, Edward, 2012. "The Federal Reserve’s Large-Scale Asset Purchase Programs: Rationale and Effects," CEPR Discussion Papers 9145, C.E.P.R. Discussion Papers.
  2. Burcu Duygan-Bump & Patrick M. Parkinson & Eric S. Rosengren & Gustavo A. Suarez & Paul S. Willen, 2010. "How effective were the Federal Reserve emergency liquidity facilities?: evidence from the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility," Risk and Policy Analysis Unit Working Paper QAU10-3, Federal Reserve Bank of Boston.
  3. Esmeralda A. Ramalho & Joaquim J.S. Ramalho & José M.R. Murteira, 2011. "Alternative Estimating And Testing Empirical Strategies For Fractional Regression Models," Journal of Economic Surveys, Wiley Blackwell, vol. 25(1), pages 19-68, 02.
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  5. Cristina Arellano & Ananth Ramanarayanan, 2008. "Default and the maturity structure in sovereign bonds," Staff Report 410, Federal Reserve Bank of Minneapolis.
  6. Ghysels, Eric & Idier, Julien & Manganelli, Simone & Vergote, Olivier, 2014. "A high frequency assessment of the ECB securities markets programme," Working Paper Series 1642, European Central Bank.
  7. Robin Greenwood & Dimitri Vayanos, 2010. "Price Pressure in the Government Bond Market," American Economic Review, American Economic Association, vol. 100(2), pages 585-90, May.
  8. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  9. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 121-133, July.
  10. Ben S. Bernanke & Vincent R. Reinhart & Brian P. Sack, 2004. "Monetary policy alternatives at the zero bound: an empirical assessment," Finance and Economics Discussion Series 2004-48, Board of Governors of the Federal Reserve System (U.S.).
  11. James D. Hamilton & Jing Cynthia Wu, 2012. "The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 3-46, 02.
  12. D’Amico, Stefania & King, Thomas B., 2013. "Flow and stock effects of large-scale treasury purchases: Evidence on the importance of local supply," Journal of Financial Economics, Elsevier, vol. 108(2), pages 425-448.
  13. Eser, Fabian & Schwaab, Bernd, 2013. "Assessing asset purchases within the ECB’s securities markets programme," Working Paper Series 1587, European Central Bank.
  14. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2012. "The Aggregate Demand for Treasury Debt," Journal of Political Economy, University of Chicago Press, vol. 120(2), pages 233 - 267.
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