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Federal Reserve Bank of San Francisco
FRBSF Economic Letter
Do Fed TIPS purchases affect market liquidity?
Jens H. E. Christensen
James M. Gillan
Abstract

The second round of Federal Reserve large-scale asset purchases, from November 2010 to June 2011, included regular purchases of Treasury inflation-protected securities, or TIPS. An analysis of liquidity premiums indicates that the functioning of the TIPS market and the related inflation swap market improved both on the days the Fed purchased TIPS and over the course of the LSAP program. Thus, TIPS purchases had liquidity benefits beyond the effect they may have had in reducing Treasury yields.


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Jens H. E. Christensen & James M. Gillan, "Do Fed TIPS purchases affect market liquidity?" , Federal Reserve Bank of San Francisco, FRBSF Economic Letter, number 07, 2012.
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Keywords: Inflation (Finance) ; Inflation-indexed bonds - United States ; Liquidity (Economics)
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