The Response of Interest Rates to U.S. and U.K. Quantitative Easing

Authors

Glenn D. Rudebusch

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2012-06 | May 1, 2012

We analyze the declines in government bond yields that followed the announcements of plans by the Federal Reserve and the Bank of England to buy longer-term government debt. Using empirical dynamic term structure models, we decompose these declines into changes in expectations about future monetary policy and changes in term premiums. We find that declines in U.S. Treasury yields mainly reflected lower policy expectations, while declines in U.K. yields appeared to reflect reduced term premiums. Thus, the relative importance of the signaling and portfolio balance channels of quantitative easing may depend on market institutional structures and central bank communications policies.

Article Citation

Rudebusch, Glenn D., and Jens H. E. Christensen. 2012. “The Response of Interest Rates to U.S. and U.K. Quantitative Easing,” Federal Reserve Bank of San Francisco Working Paper 2012-06. Available at https://doi.org/10.24148/wp2012-06

About the Author
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Jens Christensen is a research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Jens Christensen