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Linas Jurkšas

19 March 2018
Economic Bulletin Issue 2, 2018
The liquidity of euro area sovereign bond markets is important for the transmission of the ECB’s monetary policy. In particular, a high degree of liquidity fosters the link between the ECB’s monetary policy decisions, the yield curve, financial asset prices in general, and the overall cost and flow of finance in the economy. The liquidity of sovereign bond markets needs to be monitored more closely since the implementation of the ECB’s public sector purchase programme (PSPP), under which a significant share of outstanding euro area sovereign bonds has been bought. Against this background, this box presents some of the market liquidity indicators that the ECB monitors regularly. Overall, the indicators suggest that liquidity conditions in sovereign bond markets have not deteriorated since the start of the PSPP (on 9 March 2015).
JEL Code
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading