Working Papers

Price pressure during central bank asset purchases: Evidence from covered bonds SSRN Online Appendix 

This article evaluates the impact of the European Central Bank's (ECB) third covered bond purchase program (CBPP3) on yields, issuance and portfolio positions (2013–2017). It uses a matched difference-in-difference estimator, with CBPP3-ineligible covered bonds issued outside the euro area but denominated in euro serving as control group. ECB purchase volumes of 1% of the market are associated with changes in yields by -1.20 bps and in issuance by +2.43 bonds. A 1 standard deviation (6 bp) increase in the country-level average  spread-to-own government raises the effect to -2.03 bps and +3.56 bonds.  Variation in CBPP3 effectiveness does not correlate with risk premia or convenience yields. Rather, bank investors are estimated to have the least elastic demand, consistent with the prediction that they exploit yield differences between covered and sovereign bonds with similar regulatory treatment.

Presentations: Nova/WU workshop (Lisbon, 2025), AWG (Vienna, 2024), Annual Meeting of the European Finance Association (Barcelona, 2022), SFI Job Market Workshop (Online, 2020), University of Zurich (2020), Columbia Business School (NYC, 2020), SFI Research Days (Gerzensee, 2019)

The impact of sovereign credit rating ceilings on secured debt issuance SSRN

The study examines capital raising choices in Italy between 1999-2021 around Moody's A- downgrade of the sovereign, a threshold for bond haircuts in the European Central Bank's (ECB) collateral framework. Sovereign ratings constrain most ratings in a country due to rating agencies' country ceilings, with the exception of secured bonds. The study links the A- downgrade to an increase in issuance volumes and in the prices of secured bonds. It addresses various alternative explanations such as adverse selection or the ECB's purchase programs. Overall, issuers who can issue bonds with rating notch-ups face advantageous financial conditions when the country ceiling constrains credit ratings in an economy.

Presentations: Workshop Graduate Institute Geneva (2020), SFI Research Days (Gerzensee, 2018), Humboldt University of Berlin (2018)

Work in progress

Corporate bond returns on ECB announcement days

Publications

The term structure of interest rates in a New Keynesian Policy model, (with Daniel Buncic), Journal of Macroeconomics, 50, 126-150, 2016.

We jointly estimate a New Keynesian policy model with a Gaussian affine no-arbitrage specification of the term structure of interest rates, and assess how important inflation, output and monetary policy shocks are as sources of fluctuations in interest rates and the term premium. We work with observable pricing factors and utilize the computationally convenient normalization of Joslin et al. (2013b). This allows us to estimate the model without needing to restrict the parameters driving the market prices of risk. Using data for the U.S. from 1962:Q1 to 2014:Q2, we find that inflation and the output gap account for around 80% of the unconditional forecast error variance of bond yields at the short and medium end of the term structure, while monetary policy shocks account for around 20%. Bond yields respond to macroeconomic shocks only gradually, peaking after about 4 quarters. This is due to sizable monetary policy inertia estimates in our model. At the peak of the response, inflation shocks increase bond yields by more than one-to-one, and output shocks by less than one-to-one, which is consistent with a Taylor type monetary policy rule. Our term premium estimate is strongly counter-cyclical and can capture salient features of the term structure that constitute a puzzle in the expectations hypothesis.