An important implication of the duration channel is that it is not purchase flows that matter, but rather the stock of assets that the central bank is expected to hold on its balance sheet. [26] For instance, if the central bank announces a longer reinvestment horizon, it means that more duration risk is expected to be withdrawn from the market over a longer interval. The duration withdrawal leads to declining expected excess returns in the future. But those future excess returns are part of the current term premium embedded in a long-term bond. It follows that a longer reinvestment period in the future helps keep bond yields at low levels now. Similar to analysis that accompanied the asset purchases of the Federal Reserve, ECB economists have quantified the effect of our asset purchases on the yield curve. [27] Based on a term structure model that incorporates the duration extraction channel that I just explained, Chart 8 shows estimates of how much the APP has compressed the yield curve in the euro area at different points in time. Chart 8 APP impact on the euro area sovereign term structure (basis points)  Sources: ECB, based on Eser et al. (2019).
As of 2016, it is the yield of a 20-year zero coupon bond. For Germany, the series is the rate on a government bond or similar government debt instrument with 5-15 year maturity,  derived from a variety of historical sources by Jordà et al. (2019). As of 1972, it is the ten-year German Bund rate. For the US, the series is the rate on government bonds with around ten-year maturity, provided by Jordà et al. (2019). As of 1960, it is the ten-year government bond rate. The euro area OIS rate is for ten-year maturity. Latest observation: 11 November 2019. Chart 2 Yield curve slope and recessions in the euro area (percentage points)  Sources: CEPR, OECD, ECRI, Bundesbank, Thomson Reuters and ECB calculations. Notes: The slope of the yield curve shown is the spread between ten-year and one-year OIS yields since 1999. Before 1999, the spread is based on German bond data. German data back to 1972 are computed by the Bundesbank using the method of Svensson. German data prior to 1972 are extrapolated backwards based on historical series of short and longterm yields provided by the OECD. Long-term OECD yields refer to yields on outstanding listed federal securities with residual maturities of over nine to ten years traded on the secondary market. Short-term OECD yields are usually either the three-month interbank offered rates applicable to loans between banks, or the rates associated with Treasury bills, certificates of deposit or comparable instruments of three-month maturity in each case.