Eurosystem’s bond holdings may hamper market functioning – paper

Netherlands Bank
The Netherlands Bank
Photo: Rachael King

A working paper published by the Netherlands Bank investigates the effect of the Eurosystem’s unprecedentedly high holdings of bonds on repo markets.

Eurozone national central banks greatly increased their bond holdings in response to the Covid-19 pandemic, to a maximum of €1.9 trillion ($2 trillion). In the paper, Tomás Carrera de Souza and Tom Hudepohl use granular data from the Eurosystem’s Money Market Statistical Reporting database to analyse the impact.

The authors say the European

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