VGSF - WU Vienna - LC

Philipp Lentner, Vienna University of Economics and Business

Campus WU D3.0.218 12:00 - 13:00

Organizer WU Vienna

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%.



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