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The impact of the ECB asset purchases on the European bond market structure: Granular evidence on ownership concentration

Author

Listed:
  • Martijn Boermans
  • Viacheslav Keshkov

Abstract

This study investigates the impact of the Eurosystem's Public Sector Purchase Programme (PSPP) on the micro market structure of sovereign bonds. In particular, we analyze how the PSPP affected the ownership concentration of PSPP-eligible bonds. In line with portfolio rebalancing models we hypothesize that the entry of relatively new and dominant investor will unevenly displace certain investors who are willing to rebalance their portfolios, thus reducing the dispersion of holdings in the market. Using detailed security-by-security holdings data, we estimate a difference-in-differences model with a matched control group. We find that the announcement of the PSPP did not affect the ownership concentration of sovereign bonds. However, during the implementation phase the asset purchases increased the ownership concentration of the eligible sovereign bonds relative to the control group, potentially due to asymmetric portfolio rebalancing. We argue that quantitative easing had market distortionary effects and our results may explain the growing concerns for bond scarcity, market liquidity dry-ups and price spikes in the European sovereign bond market.

Suggested Citation

  • Martijn Boermans & Viacheslav Keshkov, 2018. "The impact of the ECB asset purchases on the European bond market structure: Granular evidence on ownership concentration," DNB Working Papers 590, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:590
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    References listed on IDEAS

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    Cited by:

    1. Jan Willem van den End, 2019. "Effects of QE on sovereign bond spreads through the safe asset channel," DNB Working Papers 647, Netherlands Central Bank, Research Department.
    2. HARADA Kimie & OKIMOTO Tatsuyoshi, 2019. "The BOJ's ETF Purchases and Its Effects on Nikkei 225 Stocks," Discussion papers 19014, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    quantitative easing; portfolio rebalancing; market concentration; ECB; PSPP; securities holdings statistics; unconventional monetary policy;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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