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Quantitative easing and the supply of safe assets: Evidence from international bond safety premia

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  • Christensen, Jens H.E.
  • Mirkov, Nikola N.
  • Zhang, Xin

Abstract

Through large-scale asset purchases, widely known as quantitative easing (QE), central banks around the world have affected the supply of safe assets by buying quasi-safe bonds in exchange for truly safe reserves. We examine the pricing effects of the European Central Bank’s bond purchases in the 2015–2021 period on an international panel of bond safety premia from four highly rated countries: Denmark, Germany, Sweden, and Switzerland. We find statistically significant negative effects for all four countries, highlighting an international spillover channel through which QE programs reduce bond safety premia by expanding the supply of truly safe assets.

Suggested Citation

  • Christensen, Jens H.E. & Mirkov, Nikola N. & Zhang, Xin, 2025. "Quantitative easing and the supply of safe assets: Evidence from international bond safety premia," Journal of International Economics, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:inecon:v:157:y:2025:i:c:s0022199625001035
    DOI: 10.1016/j.jinteco.2025.104146
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    Cited by:

    1. Jens H. E. Christensen & Sarah Mouabbi & Caroline M. Paulson, 2025. "German Inflation-Linked Bonds: Overpriced, Yet Undervalued," Working Paper Series 2025-03, Federal Reserve Bank of San Francisco.
    2. Han, Kefei & Kong, Manyu & Xu, Qiuhua & Zhou, Jiayi, 2026. "Exchange rate contagion and international trade: Insights from the TENET method," Journal of International Money and Finance, Elsevier, vol. 160(C).

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    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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