The local supply effect of asset purchases: evidence from the Eurosystem's CSPP

Working paper 837
Working Papers

Gepubliceerd: 17 juni 2025

Door: Jan Kakes Tom Hudepohl Casper de Haes

We estimate to what extent the Eurosystem’s Corporate Sector Purchase Programme (CSPP) impacted the price of securities that were actually bought, or their close substitutes, more than the price of other securities. For own bond purchases we do not find significant local supply effects, which is in line with the Eurosystem’s market neutrality principle of asset purchases. We do, however, find significant local supply effects caused by the purchases of substitute bonds defined by similar maturities; we estimate that these effects reduce bond yields by about 40-45 basis points. Such local supply effects are more pronounced for bonds that were eligible under the CSPP than for non-eligible bonds, for bonds that have been issued more than a year ago and for bonds with relatively low credit ratings.

Keywords: monetary policy; quantitative easing; preferred habitat;
JEL codes C26; E43; E52; E58;

Working paper no. 837

837 - The local supply effect of asset purchases: evidence from the Eurosystem's CSPP

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Research highlights:

  • We investigate local supply effects in the Eurosystem’s Corporate Sector Purchase Programme (CSPP). When local supply effects are present, purchases affect the price of securities that are actually bought (i.e. own purchases), or their close substitutes (defined by similar maturities), more than the price of other securities.
  • For own bond purchases we do not find significant local supply effects, which is in line with the Eurosystem’s market neutrality principle of asset purchases.  
  • We do, however, find significant local supply effects caused by the purchases of substitute bonds. We estimate that these effects reduce bond yields by about 40-45 basis points. Such local supply effects are most pronounced for bonds that were eligible under the CSPP, for bonds that have been issued longer ago and for bonds with lower credit ratings.

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