Flow and stock effects of large-scale Treasury purchases

By Stefania D’Amico, Thomas B. King. 2010

535 citations recorded by the source corpus.

Using a panel of daily CUSIP-level data, we study the effects of the Federal Reserve's program to purchase $300 billion of U.S. Treasury coupon securities announced and implemented during 2009. This program represented an unprecedented intervention in the Treasury market and thus allows us to shed light on the price elasticities and substitutability of Treasuries, preferred-habitat theories of the term structure, and the ability of large-scale asset purchases to reduce overall yields and improve market functioning. We find that each purchase operation, on average, caused a decline in yields in the sector purchased of 3.5 basis points on the days when these purchases occurred (the "flow effect" of the program). In addition, the program as a whole resulted in a persistent downward shift in the yield curve of as much as 50 basis points (the "stock effect"), with the largest impact in the 10- to 15-year sector. The coefficient patterns generally support a view of segmentation or imperfect substitution within the Treasury market.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/07803d1569231db2beacf4c055a8de8181971ba1

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Citations in the corpus

The effectiveness of unconventional monetary policy at the zero lower bound : a cross-country analysis (2014, background): “…Christensen, Lopez, and Rudebusch 2009, Taylor and Williams 2009, Thornton 2010) and on the effects of subsequent large-scale asset purchases on long-term interest rates and other asset prices (e.g., D’Amico and King 2010, Gagnon et al. 2010, Hamilton and Wu 2010, Neely 2010, Joyce et al. 2011).”
The Financial Market Impact of UK Quantitative Easing (2012, background): “Important empirical contributions include Doh (2010), D’Amico and King (2010), Gagnon et al (2010), Hamilton and Wu (2010), Neely (2010), Hancock and Passmore (2011), Krishnamurthy and Vissing-Jorgenson (2011) and Wright (2011).”
Assessing the Economy-Wide Effects of Quantitative Easing (2012, unknown): “Using a diﬀerent approach based on panel data analysis of individual bonds, D’Amico and King (2010) ﬁnd that LSAP1 had an eﬀect on longer-term Treasury yields of about 30 basis points for the 5-year to 15-year sector.”
On the International Spillovers of US Quantitative Easing (2018, unknown): “A number of studies have indeed referred to the hypothesis that Habitat theories hold (see Gagnon et al. 2011, D’Amico and King 2011, and Doh 2010).”
Government Bonds and Their Investors: What are the Facts and Do They Matter? (2012, unknown): “See D’Amico and King (2010), Gagnon et al. (2010), Krishnamurthy and Vissing-Jorgensen (2011), Neely (2010), or Joyce et al.”
The response of interest rates to U.S. and U.K. quantitative easing (2012, background): “1 D’Amico and King (2010), Hamilton and Wu (2012) and Krishnamurthy and Vissing-Jorgensen (2011) provide further discussion.”
Evaluating asset-market effects of unconventional monetary policy: a multi-country review (2014, unknown): “Some authors, such as Doh (2010), Gagnon et al.”