NL

• Working Paper Series
  Federico Maria Ferrara

  Central bank asset purchases
  and auction cycles revisited:
  new evidence from the euro area

  No 2927

  Disclaimer: This paper should not be reported as representing the views of the European Central Bank
  (ECB).

• Abstract
  This study provides new evidence on the relationship between unconventional monetary
  policy and auction cycles in the euro area.
• The findings indicate that Eurosystem?s asset purchase flows mitigate
  yield cycles during auction periods and counteract the amplification impact of market volatility.
• The dampening effect of central bank asset purchases on auction cycles is more sizeable and
  precisely estimated for purchases of securities with medium-term maturities and in jurisdictions
  with relatively lower credit ratings.
• On the other hand, central banks may influence price dynamics in these markets, most notably
  through their asset purchase programmes.
• If so, do central bank asset purchases
  affect bond yield movements around auction dates?
• Auction cycles are present when secondary market yields rise in
  anticipation of a debt auction and fall thereafter, generating an inverted V-shaped pattern around auction
  dates.
• ECB Working Paper Series No 2927

  3

  1

  Introduction

  The impact of central bank asset purchases on government bond markets is a focal point of economic and
  financial research.

• If so,
  do central bank asset purchases shape yield sensitivity around auction dates?
• The paper provides new evidence on the effects of Eurosystem?s asset purchases on secondary market
  yields around public debt auction dates.
• The analysis builds on previous research based on aggregate data
  on central bank asset purchases and a shorter analysis period (van Spronsen and Beetsma 2022).
• Using
  granular data on Eurosystem?s asset purchases offers an opportunity to shed light on the mechanisms linking
  unconventional monetary policy and auction cycles.
• Given this legal constraint, the study
  hypothesises that the effect of asset purchases on 10-year auction cycles is mostly indirect, and goes via price
  spillovers generated by purchases of securities outside the 10-year maturity space.
• Taken together, these results provide new evidence about auction cycles in Europe and contribute to a
  larger literature on the flow effects of central bank asset purchases on bond markets.
• Section 4 offers descriptive evidence about auction cycles in the euro area.
• Auction cycles are defined by the presence of an inverted V-shaped pattern in secondary market yields
  around primary auctions.
• That is, government bond yields rise in the run-up to the date of the auction and
  fall back to their original level after the auction.
• Their limited risk-bearing capacities and inventory management operations are
  seen as key mechanisms driving auction cycles (Beetsma et al.
• ECB Working Paper Series No 2927

  7

  Second, central bank asset purchases can alleviate the cycle by (partly) absorbing the additional supply
  of substitutable instruments in the secondary market (van Spronsen and Beetsma 2022).

• This expectation is
  supported by several analyses on the price effects of central bank bond purchases (D?Amico and King 2013;
  Arrata and Nguyen 2017; De Santis and Holm-Hadulla 2020).
• Empirically, previous research has provided evidence of auction cycles taking place across different jurisdictions.
• (2016) detect auction cycles for government debt in Italy, but not in Germany, during the European
  sovereign debt crisis.
• Research on the impact of central bank asset purchases on yield cycles around auctions is still limited.
• Their paper provides evidence
  that Eurosystem?s asset purchases reduce the presence of auction cycles for euro area government debt.
• Nonetheless, several questions remain open about auction cycles and unconventional monetary policy
  in the euro area.
• Therefore, they
  provide only a partial picture of auction cycles and central bank asset purchases in Europe.
• The use of granular data on central bank asset purchases is especially important in light of the modalities
  of monetary policy implementation of the Eurosystem.
• Altogether, these elements motivate further investigation of the relationship between central bank asset
  purchases and auction cycles in the euro area.
• Taken together, these results confirm that Eurosystem?s asset purchases mitigate yield cycles during auction periods and counteract the amplification impact of market volatility.
• The findings confirm that the flow
  effects of central bank purchases on yield movements around auction dates are driven by lower-rated countries.
• Additional analyses provide evidence for an indirect effect of purchases on auction cycles and highlight
  the presence of substantial heterogeneity across jurisdictions and purchase programmes.
• Flow Effects of Central Bank Asset Purchases on Sovereign Bond
  Prices: Evidence from a Natural Experiment.
• Federico Maria Ferrara
  European Central Bank, Frankfurt am Main, Germany; email: [email protected]

  ? European Central Bank, 2024
  Postal address 60640 Frankfurt am Main, Germany
  Telephone
  +49 69 1344 0
  Website
  www.ecb.europa.eu
  All rights reserved.

• The regulation, addressing emissions from new trucks, buses and trailers, was endorsed by MEPs with 341 votes in favour, 268 against and 14 abstentions.
• CO2 emissions from large trucks (including vocational vehicles, such as garbage trucks, tippers or concrete mixers) and buses will have to be reduced by 45% for the period 2030-2034, 65% for 2035-2039 and 90% as of 2040.
• By 2030, new urban buses will need to reduce their emissions by 90% and become zero-emission vehicles by 2035.
• Emissions reduction targets are also set for trailers (7.5%) and semi-trailers (10%), starting from 2030.

Orphan designation: Sodium (4-{(E)-3-(4-fluorophenyl)-3-[4-(3-morpholin-4-yl-prop1ynyl)phenyl]allyloxy}-2-methylphenoxy)acetate Treatment of mitochondrial encephalomyopathy, lactic acidosis and stroke-like episodes, 21/08/2020 Withdrawn