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

Author

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  • Jeromin Zettelmeyer

    (Peterson Institute for International Economics)

  • Christoph Trebesch

    (Kiel University)

Abstract

We study central bank interventions in times of severe distress (mid-2010), using a unique bond-level dataset of ECB purchases of Greek sovereign debt. ECB bond buying had a large impact on the price of short and medium maturity bonds, resulting in a remarkable "twist" of the Greek yield curve. However, the effects were limited to those sovereign bonds actually bought. We find little evidence for positive effects on market quality, or spillovers to close substitute bonds, CDS markets, or corporate bonds. Hence, our findings attest to the power of central bank intervention in times of crisis but also suggest that in highly distressed situations, this power may not extend beyond those assets actually purchased.

Suggested Citation

  • Jeromin Zettelmeyer & Christoph Trebesch, 2018. "ECB Interventions in Distressed Sovereign Debt Markets: The Case of Greek Bonds," Working Paper Series WP18-1, Peterson Institute for International Economics.
  • Handle: RePEc:iie:wpaper:wp18-1
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    More about this item

    Keywords

    Central Bank Asset Purchases; Securities Markets Programme; Eurozone Crisis; Sovereign Risk; Market Segmentation;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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