This article argues that lower government debt issuance is equivalent to a central bank-operated asset purchase program, commonly known as quantitative easing (QE), as both reduce anticipated future bond supply. However, as it involves neither asset purchases nor associated reserves creation, it is labeled passive QE. A novel classification scheme of central bank balance sheet policies ranks passive QE as stimulative. Supportive evidence from a temporary lowering of government debt issuance in Denmark suggests that declines in long-term yields reflected both reduced term premia, consistent with supply induced portfolio balance effects, and increased safety premia, consistent with safe assets scarcity effects.
Suggested citation:
Christensen, Jens H. E., and Simon T. Hetland. “Passive Quantitative Easing: Bond Supply Effects through Lower Debt Issuance. 2026.” Federal Reserve Bank of San Francisco Working Paper 2023-24. https://doi.org/10.24148/wp2023-24