The Impact of the ECB Asset Purchases on the European Bond Market Structure: Granular Evidence on Ownership Concentration

55 Pages Posted: 8 May 2018

See all articles by Martijn Adriaan Boermans

Martijn Adriaan Boermans

De Nederlandsche Bank

Viacheslav Keshkov

Utrecht University - School of Economics

Date Written: April 2018

Abstract

This study investigates the impact of the Eurosystem’s Public Sector Purchase Programme (PSPP) on the micro market structure of sovereign bonds. In particular, we analyze how the PSPP affected the ownership concentration of PSPP-eligible bonds. In line with portfolio rebalancing models we hypothesize that the entry of relatively new and dominant investor will unevenly displace certain investors who are willing to rebalance their portfolios, thus reducing the dispersion of holdings in the market. Using detailed security-by-security holdings data, we estimate a difference-in-differences model with a matched control group. We find that the announcement of the PSPP did not affect the ownership concentration of sovereign bonds. However, during the implementation phase the asset purchases increased the ownership concentration of the eligible sovereign bonds relative to the control group, potentially due to asymmetric portfolio rebalancing. We argue that quantitative easing had market distortionary effects and our results may explain the growing concerns for bond scarcity, market liquidity dry-ups and price spikes in the European sovereign bond market.

Keywords: quantitative easing, portfolio rebalancing, market concentration, ECB, PSPP, securities holdings statistics, unconventional monetary policy

JEL Classification: G11, E52, E58

Suggested Citation

Boermans, Martijn Adriaan and Keshkov, Viacheslav, The Impact of the ECB Asset Purchases on the European Bond Market Structure: Granular Evidence on Ownership Concentration (April 2018). De Nederlandsche Bank Working Paper No. 590, Available at SSRN: https://ssrn.com/abstract=3173561 or http://dx.doi.org/10.2139/ssrn.3173561

Martijn Adriaan Boermans (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Viacheslav Keshkov

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

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