Analysis of the Riksbank's asset purchases to increase transparency
Economic Commentaries, News Crisis measures taken by central banks around the world have been important in counteracting the economic effects of the coronavirus pandemic. And as many policy rates were already low prior to the pandemic, rescue purchases of securities have been an important measure. Two employees of the Riksbank’s Markets Department analyse the bank’s asset purchase programme with the aim of increasing transparency regarding the crisis measures.
In March 2020, the Riksbank took the first monetary policy measures to stave off the negative impact of the coronavirus pandemic on the Swedish economy. One of the measures was to increase the purchases of assets and its purpose was to hold interest rates low and facilitate the supply of credit.
Since then, the rescue purchase programme has gradually been extended and the Riksbank has decided to purchase assets for a total of up to SEK 700 billion until the end of December 2021. This includes purchases of Swedish government bonds and treasury bills, municipal and covered bonds and commercial paper issued by non-financial corporations.
Riksbank employees Denise Hansson and Joel Birging, who work at the Markets Department, look back in their Economic Commentary at the asset purchases made by the Riksbank during the period March 2020 to March 2021. They describe how these were executed in practice and the motives behind the design of the asset purchase programme.
For instance, they note that all purchases were made on the secondary market and most of them via weekly auctions. A number of considerations have guided the way in which purchases have been made, such as market neutrality, transparency and the monetary financing prohibition. In order to achieve a broad impact on interest rates, the Riksbank strives to ensure that its holding reflects market variations in maturities and issuers.
The asset purchase programme is continuing, and the aim of the Commentary is to contribute to increased transparency regarding the purchases the Riksbank has already made, as well as on central questions that will continue to affect the design and implementation of the Riksbank’s asset purchases.
Authors Denise Hansson and Joel Birging work at the Riksbank's Markets Department.