Fiscal dominance, the long-term interest rate and central banks
QE 2 by the Federal Reserve
A. Spread over 10-year US Treasuries In basis points
B. Issuance1
In billions of US dollars
1 Remaining maturity of about 30 years at end-December. Only marketable bonds issued between January and December of a particular year are used for that particular year’s debt issuance calculation.
Sources: Treasury Direct; national data; BIS calculations.
Graph 8
30-year US Treasury bonds
A. Spread over 10-year US Treasuries In basis points
B. Issuance1
In billions of US dollars
1 Remaining maturity of about 30 years at end-December. Only marketable bonds issued between January and December of a particular year are used for that particular year’s debt issuance calculation.
Sources: Treasury Direct; national data; BIS calculations.
Graph 9
Global official liquidity (in trillions of US dollars) A. Central bank assets in advanced economies1
B. Foreign reserves of major EMEs2
C. Global official liquidity (A + B)
1Total for the United States, the euro area, Japan, Canada, Sweden, Switzerland and the United Kingdom.
2Total of major emerging market economies (Brazil, China, Chinese Taipei, Hong Kong SAR, India, Korea, Malaysia, Mexico, Russia, Singapore, Thailand and Turkey).
Sources: Datastream; national data.
Graph 9
Global official liquidity (in trillions of US dollars) A. Central bank assets in advanced economies1
B. Foreign reserves of major EMEs2
C. Global official liquidity (A + B)
1Total for the United States, the euro area, Japan, Canada, Sweden, Switzerland and the United Kingdom.
2Total of major emerging market economies (Brazil, China, Chinese Taipei, Hong Kong SAR, India, Korea, Malaysia, Mexico, Russia, Singapore, Thailand and Turkey).
Sources: Datastream; national data.
Table 1
Debt securities outstanding1 In billions of US dollars
Dec 89 Dec 99 Dec 06 Dec 09 June 10
Governments 7,201 14,407 25,444 36,403 37,584
United States 2,839 4,408 6,236 9,479 10,338
Japan 1,306 3,670 6,750 9,657 10,538
Germany 250 622 1,479 1,850 1,651
Other euro area 1,474 2,832 4,796 6,715 6,033
United Kingdom 226 473 841 1,239 1,300
Financial
institu-tions 5,873 15,550 34,654 44,109 40,906
United States 2,656 7,979 16,014 17,464 16,687
Japan 928 1,662 1,079 1,204 1,237
Germany 482 1,531 2,399 2,649 2,242
Other euro area 959 1,898 7,720 12,124 10,669
United Kingdom 151 712 2,604 3,763 3,444
1 Domestic plus international.
Note: The BIS endeavours to eliminate any overlap between its international and do-mestic debt securities statistics as far as possible. However, as two different collection systems are used (security by security collection system for IDS and collection of aggregated data for DDS) as well as two different approaches and definitions (market definitions for the IDS and statistical definitions in the DDS), some overlap and in-consistencies might remain by a margin which differs from country to country.
Source: Dealogic; Euroclear; Thomson Reuters; Xtrakter Ltd; national authorities;
BIS.
United States 2,839 4,408 6,236 9,479 10,338
Japan 1,306 3,670 6,750 9,657 10,538
Germany 250 622 1,479 1,850 1,651
Other euro area 1,474 2,832 4,796 6,715 6,033
United Kingdom 226 473 841 1,239 1,300
Financial
institu-tions 5,873 15,550 34,654 44,109 40,906
United States 2,656 7,979 16,014 17,464 16,687
Japan 928 1,662 1,079 1,204 1,237
Germany 482 1,531 2,399 2,649 2,242
Other euro area 959 1,898 7,720 12,124 10,669
United Kingdom 151 712 2,604 3,763 3,444
1 Domestic plus international.
Note: The BIS endeavours to eliminate any overlap between its international and do-mestic debt securities statistics as far as possible. However, as two different collection systems are used (security by security collection system for IDS and collection of aggregated data for DDS) as well as two different approaches and definitions (market definitions for the IDS and statistical definitions in the DDS), some overlap and in-consistencies might remain by a margin which differs from country to country.
Source: Dealogic; Euroclear; Thomson Reuters; Xtrakter Ltd; national authorities;
BIS.
Table 2
Debt securities, changes in stocks1 In billions of US dollars
2003–
20062 2007 2008 2009 June
20102
Governments 1,771 1,195 2,651 4,226 4,745
remaining maturity < 1 year 346 –52 1,500 318 416
longer remaining maturity 1,425 1,247 1,150 3,908 4,329
Financial institutions 3,084 4,928 2,602 520 –1,187
remaining maturity < 1 year 588 808 –56 –902 –523
longer remaining maturity 2,497 4,120 2,658 1,422 –664
World GDP 43,479 55,392 61,221 57,937 59,859
1 Domestic plus international issues. Exchange rate adjusted. ² Annualised.
Note: The BIS endeavours to eliminate any overlap between its international and do-mestic debt securities statistics as far as possible. However, as two different collection systems are used (security by security collection system for IDS and collection of aggregated data for DDS) as well as two different approaches and definitions (market definitions for the IDS and statistical definitions in the DDS), some overlap and in-consistencies might remain by a margin which differs from country to country.
Source: Dealogic; Euroclear; Thomson Reuters; Xtrakter Ltd; national authorities;
IMF; BIS.
Table 2
Debt securities, changes in stocks1 In billions of US dollars
2003–
20062 2007 2008 2009 June
20102
Governments 1,771 1,195 2,651 4,226 4,745
remaining maturity < 1 year 346 –52 1,500 318 416
longer remaining maturity 1,425 1,247 1,150 3,908 4,329
Financial institutions 3,084 4,928 2,602 520 –1,187
remaining maturity < 1 year 588 808 –56 –902 –523
longer remaining maturity 2,497 4,120 2,658 1,422 –664
World GDP 43,479 55,392 61,221 57,937 59,859
1 Domestic plus international issues. Exchange rate adjusted. ² Annualised.
Note: The BIS endeavours to eliminate any overlap between its international and do-mestic debt securities statistics as far as possible. However, as two different collection systems are used (security by security collection system for IDS and collection of aggregated data for DDS) as well as two different approaches and definitions (market definitions for the IDS and statistical definitions in the DDS), some overlap and in-consistencies might remain by a margin which differs from country to country.
Source: Dealogic; Euroclear; Thomson Reuters; Xtrakter Ltd; national authorities;
IMF; BIS.
Table 3
Estimates of recent quantitative easing in the UK and US Impact on
Long-term rates Exchange rate
(or foreign impact) United States
Prakken (2010) 50 bp fall in 10-year bond yield
lowers the dollar by 2%
Neely (2010) US 10-year Treasury yields fell by a total of 107bp during the 5 Large-Scale Asset Purchase buy windows ($1.75 trillion dollar total debt purchase)
Foreign 10-year government bond yields (Australia, Canada, Germany, Japan, UK) fell by a JPY, £ depreciated by a total of on average 6.6% during the 5 Large-Scale Asset Purchase buy windows
Gagnon et al (2010) US Large-Scale Asset Purchases ($1.75 trillion dollar total debt purchase) lowered 10-year Treasury yield by 90 bp
D’Amico and King
(2010) US purchase of $300 billion of US Treasury coupon securities lowered 10 to 15 Treasury yields by up to 50bp
Meyer and Bomfim
(2010) Fed communication about
Large-Scale Asset Purchases ($1.75 trillion dollar total debt purchase) reduced 10-year Trea-sury yield by 50 to 60 bp
Table 3
Estimates of recent quantitative easing in the UK and US Impact on
Long-term rates Exchange rate
(or foreign impact) United States
Prakken (2010) 50 bp fall in 10-year bond yield
lowers the dollar by 2%
Neely (2010) US 10-year Treasury yields fell by a total of 107bp during the 5 Large-Scale Asset Purchase buy windows ($1.75 trillion dollar total debt purchase)
Foreign 10-year government bond yields (Australia, Canada, Germany, Japan, UK) fell by a JPY, £ depreciated by a total of on average 6.6% during the 5 Large-Scale Asset Purchase buy windows
Gagnon et al (2010) US Large-Scale Asset Purchases ($1.75 trillion dollar total debt purchase) lowered 10-year Treasury yield by 90 bp
D’Amico and King
(2010) US purchase of $300 billion of US Treasury coupon securities lowered 10 to 15 Treasury yields by up to 50bp
Meyer and Bomfim
(2010) Fed communication about
Large-Scale Asset Purchases ($1.75 trillion dollar total debt purchase) reduced 10-year Trea-sury yield by 50 to 60 bp
Table 3 (cont’d)
Estimates of recent quantitative easing in the UK and US Impact on
Long-term rates Long-term rates United Kingdom
Meier (2009) £125 billion purchases reduce longer-term gilt yields by between 40 and 100 bp
Joyce et al (2010) Total impact of £200 bil-lion of purchases (most of which gilts) lowered long-term gilt yields on average by 100 bp, with reactions ranging between 55 and 120 bp across the 5-25 year segment of the yield curve
Sterling ERI depreciated by 4%
Table 4
Composition of marketable US Federal government debt held by the public
$ billion
20101 1784 6692 1943 10419 35.8%
1 Using Monthly Statement of the Public Debt of the United States; Federal Reserve Table H.4.1.
Sources: This is an update of that in Tobin (1963) using US Treasury Bulletin; Fed-eral Reserve Flow-of-Funds.
Table 4
Composition of marketable US Federal government debt held by the public
$ billion
20101 1784 6692 1943 10419 35.8%
1 Using Monthly Statement of the Public Debt of the United States; Federal Reserve Table H.4.1.
Sources: This is an update of that in Tobin (1963) using US Treasury Bulletin; Fed-eral Reserve Flow-of-Funds.
Table 5
US Treasury securities held by the public
$ billion
Total Bills Bonds2 Memorandum:
average residual maturity 20091
June 6592 2000 4592 3 years 11 months
August 6918 2062 4850 4 years 0 months
Dec 7250 1788 5462 4 years 4 months
2010
June 8079 1777 6302 4 years 7 months
Sept 8476 1784 6692 4 years 11 months
1 End of month. 2 Notes, bonds and TIPS.
Sources: US Treasury Bulletinand Treasury Borrowing Advisory Committee.