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The bond market impact of the South African Reserve Bank bond purchase programme

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  • Roy Havemann
  • Henk Janse van Vuuren
  • Daan Steenkamp
  • Rossouw van Jaarsveld

Abstract

We use a unique dataset comprising over a million trades and quotes to assess the impact of the unexpected announcement of a bond purchase programme by the South African Reserve Bank on intraday market liquidity, yields and pricing volatility. Our dataset details the timing and order details of individual bonds purchased by the South African Reserve Bank during the COVID-19 pandemic, as well as data from over a million other fixed-coupon bond trades and intraday quotes. We find that the programme was successful at shoring up market confidence and addressing dislocation in the government bond market. We show that bond spreads fell both on announcement and after purchases themselves. Bond pricing adjusted slowly, with effects typically strengthening over the course of the trading day. We find that announcement effects dominated the impact of purchases themselves. Lastly, our intraday dataset enables assessment of the spillovers of central bank announcements in major economies and we show that the Federal Reserve played an important role in stabilising South Africa’s bond market, helping to support the actions of SARB.

Suggested Citation

  • Roy Havemann & Henk Janse van Vuuren & Daan Steenkamp & Rossouw van Jaarsveld, 2022. "The bond market impact of the South African Reserve Bank bond purchase programme," ERSA Working Paper Series, Economic Research Southern Africa, vol. 0.
    • Handle: RePEc:rza:ersawp:v::y:2022:i::id:38
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    Cited by:

    1. Rhea Choudhary, 2022. "AnalysingthespillovereffectsoftheSouthAfricanReserveBanksbondpurchaseprogramme," Working Papers 11039, South African Reserve Bank.
    2. Howard Diesel & Mukelani Nkuna & Tim Olds & Daan Steenkamp, 2022. "ThecostofcomplyingwithBaselIIIliquidityregulationsforSouthAfricanbanks," Working Papers 11032, South African Reserve Bank.

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    More about this item

    Keywords

    bond purchase programme; liquidity; Yield curve;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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