Reverse bond auctions are useful crisis tool, ECB paper finds

DNB’s use of reverse auctions increases liquidity and stability of bill market, researchers say

Netherlands Bank
The Netherlands Bank
Photo: Rachael King

The Netherlands Bank’s (DNB) reverse auctions for some bonds helps increase market stability and liquidity, a working paper published by the European Central Bank finds.

In The relationship between central bank auctions and bill market liquidity, Joost Bats and Jurian Hoondert look at data from DNB’s purchases. DNB purchases most bonds under the ECB’s Pandemic Emergency Purchasing Programme, bilaterally.

But the authors say it also buys “a substantial share” of short-maturity securities, or

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