Fed paper dissects link between asset purchases and bond yields
A working paper published by the Federal Reserve Bank of San Francisco on August 29 scrutinises how large-scale asset purchases by the Fed influenced international bond yields.
The authors, Michael Bauer and Christopher Neely, find that portfolio balance is the most dominant link between the two. The purchase of US assets lowered the yields on domestic bonds and on other sovereign bonds of a similar duration, the paper explains.
Buying assets can also influence other sovereign bonds through a
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