Consider the example of an adverse demand shock, shown on the right-hand side – that is, investors will want to sell bonds as the economic outlook improves and expectations of higher rates mount. You can see that the price impact of such a change in demand is likely to be more contained than in a situation where supply is greater.
The reason is that any new supply would be absorbed with smaller price changes, given the scarcity of the underlying asset. The persistence of asset purchase programmes: evidence Both of these stylised representations are supported by the data.