Notes: The figure shows by how much the term premium component of euro area sovereign yields (weighted average of Germany, France, Italy and Spain) with maturities of one to ten years is estimated to be compressed due to the APP through the duration channel at three dates: the announcement of the APP (Jan 2015), the extension of the programme in June 2018, and the announcement of the restart of net purchases in September 2019. Chart 9 APP impact on ten-year euro area sovereign yield over time (basis points)  Sources: ECB, based on Eser et al. (2019). Notes: Evolution of the APP impact on the ten-year synthetic sovereign yield (weighted average of Germany, France, Italy, Spain). The impact is derived on the basis of an arbitrage-free affine model of the term structure with a quantity factor (see Eser et al. 2019). Latest observation: September 2019. The first point is January 2015 when the ECB had just announced that it would start purchases in the following March at a rate of € billion per month, intended to run until September of the following year. According to ECB staff estimates, the anticipation of the purchases, the associated balance sheet accumulation of the ECB and, as a flip side of the coin, the expected duration extraction were associated with a term premium compression of almost 50 basis points for the ten-year maturity. For shorter-term bonds the effects are lower, such that the expectation of asset purchases is estimated to have led to a flattening of the curve.
[19] See, e.g., Bauer, M. D. and Rudebusch, G. D. (2014), “The Signalling Channel for Federal Reserve Bond Purchases”, International Journal of Central Banking, 10(3), pp. 233–290. See also Broadbent, B. (2018), “The history and future of QE”, Speech given at Society of Professional Economists, London, 23 July 2018, and Christensen, J. and Krogstrup, S. (forthcoming), “Transmission of Quantitative Easing: The Role of Central Bank Reserves”, Economic Journal, who argue for another channel emphasising the relevance of reserves for the balance sheets of commercial banks. [20] In addition to the press conferences following Governing Council meetings the events also include other public communication by ECB President Mario Draghi. At the press conference following the September 2014 Governing Council meeting, the first in the event cluster, the President explicitly answered a journalist’s question with the words “Yes, it was discussed. QE was discussed. […]. A broad asset purchase programme was discussed, and some Governors made clear that they would like to do more”. [21] See Lemke, W. and Werner, T. (forthcoming), “Dissecting long-term Bund yields in the run-up to the ECB’s public sector purchase programme”, Journal of Banking and Finance. [22] At the same time, the dominating role of the term premium is not a general feature or model artefact. As exemplified by the righthand bar in Chart 7, there are events where rate expectations are the dominating factor. The particular date shown there corresponds to an ECB press conference during the financial crisis that induced market participants to adjust markedly their policy rate expectations.