Second, it is important to learn from Arthur Conan Doyle and note ‘the dogs that didn’t bark’. We have witnessed several shocks since we began our purchase programme that, in other conditions, might have led to substantial market volatility.
For example, the major realignments of global FX reserve portfolios in the summer of last year passed without a significant increase in euro area yields or yield volatility. In this sense, the presence of PSPP has aided market functioning by providing a constant source of demand in the market and by flexibly directing this demand towards particularly oversold securities.