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The Irish Government Bond Market and Quantitative Easing

Author

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  • Larkin, John

    (Central Bank of Ireland)

  • Anderson, PJ

    (Central Bank of Ireland)

  • Furlong, Sean

    (Central Bank of Ireland)

Abstract

Between September 2014 and the end of 2018, under the ECB’s Asset Purchase Programme (APP), the Eurosystem purchased over €2.5 trillion worth of securities. By the end of December 2018, over €30bn of Irish government bonds, a significant portion of the Irish government bond market, had been purchased under the programme. As might be expected after such an event, the bond market has undergone a number of changes. We examine these changes under three key themes. Firstly, we look at the impact on yields. Secondly, we look at the market structure in terms of the duration, the cost of Irish government debt and the change in the structure of the investor base. Finally, we examine the impact on the liquidity of Irish government bonds over the period. We present strong evidence that announcement effect of the APP caused a compression of Irish bond yields. This has contributed to financing conditions that indirectly support increased issuance of Irish sovereign debt at lower interest rates, which in turn has reduced Ireland’s debt servicing costs. The maturity profile of Irish government debt has also been extended. Finally, we find little evidence that liquidity conditions deteriorated over the period, contrary to expectations when the programme was announced.

Suggested Citation

  • Larkin, John & Anderson, PJ & Furlong, Sean, 2019. "The Irish Government Bond Market and Quantitative Easing," Quarterly Bulletin Articles, Central Bank of Ireland, pages 78-100, April.
    • Handle: RePEc:cbi:qtbart:y:2019:m:04:p:78-100
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    References listed on IDEAS

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    Cited by:

    1. Conefrey, Thomas & O'Reilly, Gerard & Walsh, Graeme, 2019. "Fiscal Windfalls: A Model-Based Analysis," Economic Letters 3/EL/19, Central Bank of Ireland.
    2. Cormac Cawley & Marie Finnegan, 2019. "Transmission Channels of Central Bank Asset Purchases in the Irish Economy," Economies, MDPI, vol. 7(4), pages 1-25, September.
    3. Marie Finnegan & Supriya Kapoor, 2023. "ECB unconventional monetary policy and SME access to finance," Small Business Economics, Springer, vol. 61(3), pages 1253-1288, October.
    4. Vasiliki Dimakopoulou & George Economides & Apostolis Philippopoulos, 2021. "The ECB's Policy, the Recovery Fund and the Importance of Trust: The Case of Greece," CESifo Working Paper Series 9371, CESifo.
    5. Cawley, Cormac & Finnegan, Marie, 2019. "Transmission channels of central bank asset purchases in the Irish economy," MPRA Paper 96547, University Library of Munich, Germany.

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