Flow and Stock Effects of Large-Scale Treasury Purchases (2010)
| Venue: | Finance and Economics Discussion Series 2010–52. Washington: Board of Governors of the Federal Reserve System |
| Citations: | 15 - 0 self |
BibTeX
@INPROCEEDINGS{King10flowand,
author = {Thomas B. King},
title = {Flow and Stock Effects of Large-Scale Treasury Purchases},
booktitle = {Finance and Economics Discussion Series 2010–52. Washington: Board of Governors of the Federal Reserve System},
year = {2010}
}
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Abstract
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, as well as on 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 temporary decline in yields in the sector purchased on the order of 4 basis points (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 45 basis points, with the largest impact in the 10- to 15year sector (the “stock effect”). Contact:
