Macroeconomic News and Sovereign Interest Rate Spreads before and during Quantitative Easing

This paper studies how macroeconomic news affected the spreads of Italian sovereign bonds before and during the quantitative easing by the European Central Bank. Daily changes in the bond spreads are regressed on macroeconomic news shocks, where the news shocks are computed as the difference between the published data and the preceding private-sector forecasts. The analysis shows that macroeconomic news shocks had economically and statistically significant effects on Italian bond spreads in 2012–2014 before quantitative easing, while the effects were negligible afterwards although with a partial exception of a period in 2019 when the net asset purchases were paused.

Applied Economics