The Impact of QE on Sovereign Spreads in the Emu

We examine the effect of the European Central Bank’s Quantitative Easing (QE) on sovereign bond spreads of crisis-prone EMU countries. Outcomes of panel regression models show that QE lowered the effect of volatility on sovereign bond spreads by one to two percentage points. Asset purchase programs explicitly aimed at market stabilization most clearly reduced the effect of volatility on spreads. Our results add to understanding the effects of QE as backstop facility in sovereign bond markets