BEGIN:VCALENDAR
VERSION:2.0
PRODID:-//Memento EPFL//
BEGIN:VEVENT
SUMMARY:Asset Purchase Rules:  How QE Transformed the Bond Market
DTSTART:20241029T121500
DTEND:20241029T131500
DTSTAMP:20260404T042417Z
UID:e4c32dd48a2e5f94b0927402419705d72e1e51b452d7526a2ca99267
CATEGORIES:Conferences - Seminars
DESCRIPTION:Alan Moreira - Simon Business School\, University of Rochester
 \nWe argue that quantitative easing (QE) and tightening policies constitut
 e a dynamic state-contingent plan instead of a succession of independent i
 nterventions. This view changes the main reason QE is effective by adding 
 an insurance channel to the static effect of absorbing bond supply in a gi
 ven period. QE purchases occur in bad economic states (e.g.\, 2008-2009 or
  2020) when the supply of government debt increases. Increasing long-term 
 bond prices in bad economic states increases their safety\, driving up the
 ir value and thus lowering ex-ante yields. We estimate that this insurance
  channel alone lowers long-term bond yields by 75-100 bps. This channel ex
 plains the prevalence of low long-term yields\, low term premia\, and low\
 nyield volatility since the introduction of QE\, despite the sharp increas
 e in net government debt supply. Consistent with a state-contingent channe
 l\, implied volatilities of long-duration risk-free securities fall substa
 ntially on QE announcements\, even for options with maturities out to 10 y
 ears. We calibrate a policy rule for asset purchases to their historical p
 ath and include it in a quantitative term structure model. In the model\, 
 state-contingent QE offsets term premia fluctuations in long-term bonds. T
 he insurance effect from this channel lowers long-term Treasury yields by 
 75bps ex-ante\, which explains about 75% of the total effect of QE on yiel
 ds. The calibrated model matches both broad patterns in bond yields and th
 e response to QE announcements.\nWith Valentin Haddad\, Alan Moreira\, and
  Tyler Muir
LOCATION:UniL Campus\, Room Extra 126
STATUS:CANCELLED
END:VEVENT
END:VCALENDAR