Increasing scarcity in that segment of the cash 5 / 10  BIS central bankers' speeches  market then also translated into a persistent rise in the specialness premia of such bonds, even when abstracting from year-end effects. Our decision to accept cash as collateral in securities lending, and to allow purchases below the DFR, contributed to relieving this pressure. Premia across maturity buckets are now broadly similar. The relatively low specialness premia for bonds with shorter maturities, in turn, also suggests that the majority of holders of such bonds – mainly non-euro area investors without access to our deposit facility, as I illustrated in a previous speech – were, and remain, generally willing to provide them in sufficient quantity in the repo market.10 Yet, this chart also reinforces the point I made earlier about the flow and stock effects of our purchases: with the effective supply of bonds gradually shrinking over time as a result of our purchases, specialness premia have been persistently inching upwards.11 While stock effects reinforce one of the key transmission channels of the APP by increasing the “value for money” – the bang for the buck – of new net purchases in terms of their impact on financial conditions, we also need to be mindful that a shortage of government bonds may over time adversely affect the intermediation capacity of repo markets. There are two reasons for this. First, government bonds are the main type of collateral used in repo markets, primarily because of their safety and liquidity.
(2015), “Understanding the role of debt in the financial system”, Bank for International Settlements, Working Paper No 479, January. 3 See Committee on the Global Financial System (2017), “Repo market functioning”, CGFS Papers, No 59; and  International Capital Market Association (2015), “Perspectives from the eye of the storm: The current state and future evolution of the European repo market”. 4 See e.g. Altavilla, C., G. Carboni and R. Motto (2015), “Asset purchase programmes and financial markets:  lessons from the euro area”, ECB Working Paper No 1864; Andrade, P., J. Breckenfelder, F. De Fiore, P. Karadi and O. Tristani (2016), “The ECB's asset purchase programme: an early assessment”, ECB Working Paper No 1956; and Blattner, T.S. and M. Joyce (2016), “Net debt supply shocks in the euro area and the implications for QE”, ECB Working Paper No 1957. 5 For a theoretical disposition, see Duffie, D. (1996), “Special Repo Rates”, Journal of Finance, Vol. 51(2), pp. 493-526. 6 See e.g. International Capital Market Association (2017), “European Repo Market Survey”, No 33, October. 7 Securities purchased under the PSPP have been made available for securities lending in a decentralised  manner by Eurosystem central banks since 2 April 2015. As of 8 December 2016, Eurosystem central banks have the possibility to also accept cash as collateral in their PSPP securities lending facilities without having to reinvest it in a cash-neutral manner. The aim of securities lending is to support bond and repo market liquidity without unduly curtailing normal repo market activity.