July 13, 2015 | Refinancing

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IFDP2015-1139: Cheap Talk and the Efficacy of the ECB’s Securities Market Programme: Did Bond Purchases Matter?

July 13th, 2015

Michiel De Pooter, Rebecca DeSimone, Robert F. Martin, and Seth Pruitt. In 2010, in response to an ever-worsening fiscal crisis, the ECB began purchasing sovereign debt from troubled euro-area countries through its Securities Market Programme (SMP). This program was designed to improve market functioning and restore the monetary transmission mechanism within the euro area. This paper does not test those ideals. Rather, we test whether SMP purchases systematically lowered peripheral yields and spreads. We find limited evidence of purchase effects but large announcement effects. In addition, on days in which the ECB was believed to have made large purchases, yields moved down, independent of the size of the ECB’s purchases or even if the ECB conducted any purchase at all that week. In all, we conclude that the ECB’s SMP influenced yields through a confidence channel rather than through any direct purchase effect. In the appendix to this paper we provide a detailed timeline of SMP purchases and market beliefs about purchase timing.

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IFDP2015-1138: The Liquidity Effects of Official Bond Market Intervention

July 13th, 2015

Michiel De Pooter, Robert F. Martin, and Seth Pruitt. To "ensure depth and liquidity," the European Central Bank in 2010 and 2011 repeatedly intervened in sovereign debt markets through its Securities Markets Programme. These purchases provide a unique natural experiment for testing the effects of large-scale asset purchases on risk premia arising from liquidity concerns. To explore how official intervention influences liquidity premia, we develop a search-based asset-pricing model. Consistent with our model’s predictions, we find statistically and economically significant stock and flow effects on sovereign bonds’ liquidity premia in response to official purchases.

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What if you Over-Contribute to a 401K? (and a Case for Purposefully Doing so when you Change Jobs)

July 13th, 2015

All good things come with limitations. And never is that more true than with retirement accounts.

For those lucky enough to have an employer-sponsored 401K (it is rarer that you think), you are probably aware that …

What if you Over-Contribute to a 401K? (and a Case for Purposefully Doing so when you Change Jobs)

[Read the rest of the story at 20somethingfinance.com]

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