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Central bank asset purchases and auction cycles revisited: new evidence from the euro area

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Friday, April 19, 2024
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Working Paper Series

Key Points: 
    • Working Paper Series
      Federico Maria Ferrara

      Central bank asset purchases
      and auction cycles revisited:
      new evidence from the euro area

      No 2927

      Disclaimer: This paper should not be reported as representing the views of the European Central Bank
      (ECB).

    • Abstract
      This study provides new evidence on the relationship between unconventional monetary
      policy and auction cycles in the euro area.
    • The findings indicate that Eurosystem?s asset purchase flows mitigate
      yield cycles during auction periods and counteract the amplification impact of market volatility.
    • The dampening effect of central bank asset purchases on auction cycles is more sizeable and
      precisely estimated for purchases of securities with medium-term maturities and in jurisdictions
      with relatively lower credit ratings.
    • On the other hand, central banks may influence price dynamics in these markets, most notably
      through their asset purchase programmes.
    • If so, do central bank asset purchases
      affect bond yield movements around auction dates?
    • Auction cycles are present when secondary market yields rise in
      anticipation of a debt auction and fall thereafter, generating an inverted V-shaped pattern around auction
      dates.
    • ECB Working Paper Series No 2927

      3

      1

      Introduction

      The impact of central bank asset purchases on government bond markets is a focal point of economic and
      financial research.

    • If so,
      do central bank asset purchases shape yield sensitivity around auction dates?
    • The paper provides new evidence on the effects of Eurosystem?s asset purchases on secondary market
      yields around public debt auction dates.
    • The analysis builds on previous research based on aggregate data
      on central bank asset purchases and a shorter analysis period (van Spronsen and Beetsma 2022).
    • Using
      granular data on Eurosystem?s asset purchases offers an opportunity to shed light on the mechanisms linking
      unconventional monetary policy and auction cycles.
    • Given this legal constraint, the study
      hypothesises that the effect of asset purchases on 10-year auction cycles is mostly indirect, and goes via price
      spillovers generated by purchases of securities outside the 10-year maturity space.
    • Taken together, these results provide new evidence about auction cycles in Europe and contribute to a
      larger literature on the flow effects of central bank asset purchases on bond markets.
    • Section 4 offers descriptive evidence about auction cycles in the euro area.
    • Auction cycles are defined by the presence of an inverted V-shaped pattern in secondary market yields
      around primary auctions.
    • That is, government bond yields rise in the run-up to the date of the auction and
      fall back to their original level after the auction.
    • Their limited risk-bearing capacities and inventory management operations are
      seen as key mechanisms driving auction cycles (Beetsma et al.
    • ECB Working Paper Series No 2927

      7

      Second, central bank asset purchases can alleviate the cycle by (partly) absorbing the additional supply
      of substitutable instruments in the secondary market (van Spronsen and Beetsma 2022).

    • This expectation is
      supported by several analyses on the price effects of central bank bond purchases (D?Amico and King 2013;
      Arrata and Nguyen 2017; De Santis and Holm-Hadulla 2020).
    • Empirically, previous research has provided evidence of auction cycles taking place across different jurisdictions.
    • (2016) detect auction cycles for government debt in Italy, but not in Germany, during the European
      sovereign debt crisis.
    • Research on the impact of central bank asset purchases on yield cycles around auctions is still limited.
    • Their paper provides evidence
      that Eurosystem?s asset purchases reduce the presence of auction cycles for euro area government debt.
    • Nonetheless, several questions remain open about auction cycles and unconventional monetary policy
      in the euro area.
    • Therefore, they
      provide only a partial picture of auction cycles and central bank asset purchases in Europe.
    • The use of granular data on central bank asset purchases is especially important in light of the modalities
      of monetary policy implementation of the Eurosystem.
    • Altogether, these elements motivate further investigation of the relationship between central bank asset
      purchases and auction cycles in the euro area.
    • Taken together, these results confirm that Eurosystem?s asset purchases mitigate yield cycles during auction periods and counteract the amplification impact of market volatility.
    • The findings confirm that the flow
      effects of central bank purchases on yield movements around auction dates are driven by lower-rated countries.
    • Additional analyses provide evidence for an indirect effect of purchases on auction cycles and highlight
      the presence of substantial heterogeneity across jurisdictions and purchase programmes.
    • Flow Effects of Central Bank Asset Purchases on Sovereign Bond
      Prices: Evidence from a Natural Experiment.
    • Federico Maria Ferrara
      European Central Bank, Frankfurt am Main, Germany; email: [email protected]

      ? European Central Bank, 2024
      Postal address 60640 Frankfurt am Main, Germany
      Telephone
      +49 69 1344 0
      Website
      www.ecb.europa.eu
      All rights reserved.

DGAP-News: Comcast Launches WiFi-Connected 'Lift Zones' at Sites Serving Veterans Experiencing Houselessness

Retrieved on: 
Tuesday, November 9, 2021
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Working with its network of community-based organizations, Comcast is providing high-capacity WiFi access in spaces designed to help enhance the learning experience for students.

Key Points: 
  • Working with its network of community-based organizations, Comcast is providing high-capacity WiFi access in spaces designed to help enhance the learning experience for students.
  • The Breitung Building in Northeast Portland and Clayton Mohr Commons in Oregon City now both feature free gig-speed WiFi provided by Comcast, allowing dozens of veterans to work on computers simultaneously.
  • 'We're expanding our reach as we partner with local organizations focused on serving our houseless veterans' communities.'
  • ABOUT COMCAST CORPORATION: Comcast Corporation (Nasdaq: CMCSA) is a global media and technology company that connects people to moments that matter.