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

67 Pages Posted: 26 Jan 2018

See all articles by Christoph Trebesch

Christoph Trebesch

Kiel Institute for the World Economy; Centre for Economic Policy Research (CEPR)

Jeromin Zettelmeyer

Peter G. Peterson Institute for International Economics; CEPR

Multiple version iconThere are 5 versions of this paper

Date Written: January 22, 2018

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.

Keywords: Central Bank Asset Purchases, Securities Markets Programme, Eurozone Crisis, Sovereign Risk, Market Segmentation

JEL Classification: E430, E580, F340, G120

Suggested Citation

Trebesch, Christoph and Zettelmeyer, Jeromin, ECB Interventions in Distressed Sovereign Debt Markets: The Case of Greek Bonds (January 22, 2018). Peterson Institute for International Economics Working Paper No. 18-1. Available at SSRN: https://ssrn.com/abstract=3106769 or http://dx.doi.org/10.2139/ssrn.3106769

Christoph Trebesch

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, D-24100
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Jeromin Zettelmeyer (Contact Author)

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

CEPR ( email )

London
United Kingdom

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