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Sovereign bond purchases and risk sharing: myth and reality of the European QE

Gerba, Eddie and Macchiarelli, Corrado (2015) Sovereign bond purchases and risk sharing: myth and reality of the European QE. IP/A/ECON/2015-02 (PE 542.222). European Parliament, Policy Department A: Economic and Scientific Policy, Brussels, Belgium.

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Abstract

In March, the Eurosystem started to purchase on the secondary market euro- denominated bonds issued by governments, agencies and European institutions. The total amount of bond purchases is estimated to 1.14 trillion EUR until September 2016, or 60 billion EUR per month. The size of the Expanded Asset Purchase Program raises issues of scarcity of bonds to be purchased by the Eurosystem without inducing a fall of yields at record (negative) levels. Several sovereign bonds (Germany, France, Netherlands) already exhibit negative rates. Against this background, this paper reviews the main features of government bond markets in the Euro-area, including its size, structure, and current developments. Moreover it discusses the (potential) financial risks that the Eurosystem might be taking on its balance sheet in view of the currently low (or negative) yields and (expected) shortage in supply of sovereign bonds.

Item Type: Monograph (Report)
Official URL: http://www.europarl.europa.eu/
Additional Information: "This policy contribution was prepared on request of the ECON Committee of the European Parliament for the Monetary Dialogue with the President of the European Central Bank on 02/06/2016 (http://www.europarl.europa.eu/committees/en/econ/monetary-dialogue.html). Copyright remains with the European Parliament at all times". © 2015 European Parliament
Divisions: European Institute
Subjects: J Political Science > JN Political institutions (Europe)
Sets: Departments > European Institute
Date Deposited: 07 Dec 2016 12:39
Last Modified: 07 Dec 2016 12:46
URI: http://eprints.lse.ac.uk/id/eprint/68543

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