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Fed asset buying and private borrowing rates

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  • Michael D. Bauer

Abstract

Past rounds of large-scale asset purchases by the Federal Reserve have lowered yields not only on the targeted securities, but also on various private borrowing rates. In particular, yields on corporate bonds and primary mortgage rates decreased in response to Fed asset purchase announcements. Notably, however, the link between rates on mortgage-backed securities and actual mortgage rates has weakened in the wake of the financial crisis.

Suggested Citation

  • Michael D. Bauer, 2012. "Fed asset buying and private borrowing rates," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue may21.
    • Handle: RePEc:fip:fedfel:y:2012:i:may21:n:2012-16
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    References listed on IDEAS

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    1. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 215-287.
    2. Michael D. Bauer & Glenn D. Rudebusch, 2014. "The Signaling Channel for Federal Reserve Bond Purchases," International Journal of Central Banking, International Journal of Central Banking, vol. 10(3), pages 233-289, September.
    3. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 215-287.
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    Cited by:

    1. Kazuo Ueda, 2013. "Response of Asset Prices to Monetary Policy under Abenomics," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(2), pages 252-269, December.
    2. Carlos Carvalho & Eric Hsu & Fernanda Nechio, 2016. "Fed communication and the zero lower bound," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    3. Ahmed, Shaghil & Zlate, Andrei, 2014. "Capital flows to emerging market economies: A brave new world?," Journal of International Money and Finance, Elsevier, vol. 48(PB), pages 221-248.
    4. J. Boeckx & N. Cordemans & M. Dossche, 2013. "Causes and implications of the low level of the risk-free interest rate," Economic Review, National Bank of Belgium, issue ii, pages 63-88, September.
    5. Yoshiyuki Nakazono & Satoshi Ikeda, 2016. "Stock Market Responses Under Quantitative Easing: State Dependence and Transparency in Monetary Policy," Pacific Economic Review, Wiley Blackwell, vol. 21(5), pages 560-580, December.
    6. John D. Burger & Francis E. Warnock & Veronica C. Warnock, 2018. "The Effects of U.S. Monetary Policy on Emerging Market Economies’ Sovereign and Corporate Bond Markets," Central Banking, Analysis, and Economic Policies Book Series, in: Enrique G. Mendoza & Ernesto Pastén & Diego Saravia (ed.),Monetary Policy and Global Spillovers: Mechanisms, Effects and Policy Measures, edition 1, volume 25, chapter 3, pages 049-095, Central Bank of Chile.
    7. Barroso, João Barata R.B. & da Silva, Luiz A. Pereira & Sales, Adriana Soares, 2016. "Quantitative easing and related capital flows into Brazil: Measuring its effects and transmission channels through a rigorous counterfactual evaluation," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 102-122.

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    Keywords

    Monetary policy; Interest rates;

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