Our speaker will be Philipp Lentner (Vienna University of Economics and Business).

He will give a talk on “Price pressure during central bank asset purchases: Evidence from the covered bond market”.

Abstract: 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%.

The talk will take place on June 29, 2022 hybrid in room D3.0.218 at 12.00 p.m. - 1:00 p.m.

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