The Finance Brown Bag Seminar is held by the Institute for Finance, Banking and Insurance (WU Vienna) and the Vienna Graduate School of Finance (VGSF). It serves as a presentation platform for PhD students, faculty members, and visitors. An overview of BBS on the website of the Institute for Finance, Banking and Insurance.
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Philipp Lentner, Vienna University of Economics and Business
Price pressure during central bank asset purchases: Evidence from the covered bond market
This paper studies how the Eurosystem covered bond purchase program announced on September 4, 2014 affected covered bond data on return performance, yields, issuance and cover pools. In line with inelastic markets, difference-in-difference regressions show that a 1% purchase of outstanding amounts increased bond valuations of German covered bonds by 3.68 bps, relative to a sample of closely matched Scandinavian covered bonds. 85.33% of this effect accrued in the first six weeks of purchases and it reversed by event year three (down to 20.80%). Simultaneously, banks issue abnormal amounts of covered bonds in line with issuers locking in a temporary funding advantage. Evidence from cover pool data shows that banks increased cover pool risk, i.e. lengthened the duration of cover pool assets relative to liabilities by 25%.
