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The rise of central banks as sovereign debt holders: Implications for investor bases

Author(s): Alvise Lennkh, Bernhard Bartels, Thibault Vasse

Date published: Oct 2019

SUERF Policy Note, Issue No 109
by Alvise Lennkh, Bernhard Bartels and Thibault Vasse
Scope Ratings GmbH


JEL-codes: E58, E63, F34.
Keywords: Sovereign debt, central banks, quantitative easing, investor base, monetary policy.

This paper examines changes between 2008 and 2018 to the sovereign investor base of 27 countries across six institutional sectors: domestic central banks, domestic banks, domestic non-banks, the foreign official sector, foreign banks and foreign non-banks. We find that QE programmes have led to central banks becoming increasingly dominant in sovereign debt markets, accompanied by heterogeneous shifts in investor bases. Central banks have mostly displaced traditional domestic (not foreign) investors such as banks or institutional investors. The implications are threefold: Issuers benefit from lower re-financing risks but have a more concentrated investor base; investors face a trade-off between safe-haven assets and the search for yield; and central banks are increasingly exposed to their respective sovereigns, with implications for monetary policy independence and effectiveness.

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SUERF Policy Note, Issue No 109SUERF Policy Note, Issue No 109

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