Using Changes in Auction Maturity Sectors to Help Identify the Impact of QE on Gilt Yields

9 Pages Posted: 6 Jul 2012

See all articles by Ryan Banerjee

Ryan Banerjee

Bank for International Settlements (BIS)

David Latto

Bank of England

Nick McLaren

Bank of England

Date Written: June 20, 2012

Abstract

Using the information contained in economic news and data releases, financial markets have widely anticipated recent Monetary Policy Committee announcements about the amount of assets the Bank of England intends to purchase as part of its quantitative easing (QE) policy. This makes it increasingly difficult to identify the impact of QE on gilt yields. This article uses three ‘natural experiments’ associated with operational changes to the distribution of gilt purchases — in March 2009, August 2009 and February 2012 — to help overcome this identification problem. It finds that the ‘local supply’ channel, which can be identified using these events, can explain around half of the total impact of QE on gilt yields. The estimates of this effect are broadly similar across the three events; so the strength of this channel of QE does not appear to have changed significantly since gilt purchases were introduced in early 2009.

Suggested Citation

Banerjee, Ryan and Latto, David and McLaren, Nick, Using Changes in Auction Maturity Sectors to Help Identify the Impact of QE on Gilt Yields (June 20, 2012). Bank of England Quarterly Bulletin 2012 Q2, Available at SSRN: https://ssrn.com/abstract=2101102

Ryan Banerjee (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

David Latto

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Nick McLaren

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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