Central bank-driven mispricing

  • We show that bond purchases undertaken in the context of quantitative easing efforts by the European Central Bank created a large mispricing between the market for German and Italian government bonds and their respective futures contracts. On top of the direct effect the buying pressure exerted on bond prices, we show three indirect effects through which the scarcity of bonds, resulting from the asset purchases, drove a wedge between the futures contracts and the underlying bonds: the deterioration of bond market liquidity, the increased bond specialness on the repurchase agreement market, and the greater uncertainty about bond availability as collateral.

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Metadaten
Author:Loriana PelizzonORCiDGND, Marti G Subrahmanyan, Davide Tomio, Jun Uno
URN:urn:nbn:de:hebis:30:3-472382
URL:https://ssrn.com/abstract=3239407
DOI:https://doi.org/10.2139/ssrn.3239407
Parent Title (English):SAFE working paper series ; No. 226
Series (Serial Number):SAFE working paper (226)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2018
Year of first Publication:2018
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2018/09/05
Issue:This version: August 2018
Page Number:60
Note:
First version: May 2017. This version: August 2018.
HeBIS-PPN:436688433
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universit├Ątspublikationen
Licence (German):License LogoDeutsches Urheberrecht