SPEECH
DATE:
2022-12-14
SPEAKER:
Martin Flodén
VENUE:
Handelsbanken
My thoughts on the Riksbank's asset
purchases*
After buying assets for eight years, the Riksbank is planning to conclude the
purchases at the end of the year. At the same time, the rapidly rising interest
rates mean that the value of the assets we have purchased has fallen. The
Riksbank will therefore in all probability report a large financial loss for 2022, and
our equity can become negative as a result. How should we actually view the
role of asset purchases as a monetary policy tool in the light of recent years'
experience?
My conclusions can be summarised into three points:
 There are no clear indications that the Riksbank's purchases of
government bonds during the period from 2015 to 2019 resulted in lower
financing costs for households and companies. The purchases nevertheless
appear to have contributed to strengthening confidence in the inflation
target, and may therefore have contributed to both inflation and inflation
expectations rising from 2015 to 2017, and then remaining close to 2 per
cent for a few years.
 The Riksbank's purchases during the coronavirus crisis were important and
contributed to the financial markets continuing to function, to the
economic recovery being rapid, and helped avoid a prolonged recession. This
was of great value to the economy. On the other hand, I find it difficult to
see the value of later increasing and prolonging the asset purchase
programme in a situation where the economy was recovering rapidly and the
financial markets were functioning again.

Asset purchases need to be weighed against the risks and problems they
can entail. One risk, which has now begun to materialise, is that the
purchases entail substantial financial losses. This may, for example,
jeopardise the Riksbank's financial independence and thereby impair the
conditions for conducting monetary policy in the long run. Another risk is that
market participants start to expect the Riksbank to step in as buyer when
there is stress on the markets.
Why should a central bank purchase assets?
During and after the global financial crisis, central banks have needed to manage
financial markets that have periodically functioned very poorly. Moreover, their
policy rates have at times been limited by a lower bound. It has therefore not
been possible to cut the policy rate as much as would have been needed. To
manage the problems, many central banks have over the past 15 years launched
extensive programmes for asset purchases.
It is in many ways obvious that asset purchases will have an effect at the height of
a financial crisis when the markets are functioning poorly. By entering as a buyer,
price falls can be limited. This enables the central bank to reduce the risk that
expectations of large price falls and rising risk premiums will be self-fulfilling. It is
also easy to see the potential problems with such measures, for instance that the
central bank has to carry risk that the market no longer wants to or can price and
that private agents are not fully affected by the consequences of their risky
investments.
It is not as self-evident that asset purchases contribute to making monetary policy
more expansionary when the financial markets are functioning normally, but the
policy rate is limited by its lower bound. In recent years, however, an extensive
research literature has emerged, trying to investigate how asset purchases
function.1 The literature identifies several mechanisms that the asset purchases can
work through, and also finds some empirical support for central banks' asset
purchases having worked well.2
My interpretation of the experiences in Sweden differs somewhat from the
general interpretation of the international experiences, however. To facilitate the
continued discussion, I divide the asset purchases into two main phases (see
Figure 1). The first phase concerns the purchases of government bonds prior to the
pandemic. The second phase concerns the purchases of securities decided during
and after the pandemic.
Figure 1. The Riksbank's monetary policy securities holdings
Nominal amounts, SEK billion
Note. Phase 1 refers to decisions during 2015 to 2019 to purchase government bonds from
2015 to 2020. Phase 2a refers to decisions during March to June 2020 to purchase securities up
to mid-2021. Phase 2b refers to decisions from November 2020 to June 2022 to purchase
securities during 2021 and 2022.
Source: The Riksbank.
The effects of the Riksbank's asset purchases
Phase 1: 2015-2019 - purchases of government bonds to bring
inflation up to the target
Despite the Riksbank having cut the policy rate to zero in autumn 2014, it was
clear at the start of 2015 that inflationary pressures were problematically weak,
and there were also signs that confidence in the inflation target had weakened. To
bring inflation up to the target and reinforce confidence in the inflation target,
monetary policy needed to be made even more expansionary. In February 2015,
the Executive Board therefore decided to cut the policy rate to -0.10 per cent and
as a supplement to this to buy government bonds for SEK 10 billion.
The purchasing programme was soon extended and prolonged; during the years
2015 to 2019, the Executive Board decided to purchase government bonds for a
total of SEK 400 billion, corresponding to around 8 per cent of Sweden's GDP.3,4
I would like to highlight two effects of this asset purchase programme: that the
rates on government securities fell and that confidence in the Riksbank's mone-
tary policy strengthened. However, it is unclear whether the purchases
contributed to the exchange rate remaining weak, and - above all - whether the
economy was stimulated by the lower long-term rates.
The Riksbank's purchases pushed down yields on securities
Let me begin with yields on government securities, which fell. On the surface, this
looks like a typical portfolio balance effect that has been highlighted in many
studies, for instance Vayanos and Vila (2021). The idea is that the policy rate is limited
by its lower bound, but that the yield curve slopes upwards so that interest rates
at longer maturities can be pushed down. When the central bank buys
government bonds with long maturities, investors who want debt instruments with long
maturities need to seek other investments. This means that prices rise, that is, the
rates fall, also on other assets with long maturities. As borrowers then gain access
to cheaper financing, monetary policy has become more expansionary.
But for several reasons, this was not really how it worked in Sweden. Certainly,
rates on government securities appear to have fallen. This is supported by event
studies which investigate how market rates are affected by new information on
asset purchases.5 Erikson (2021) also finds that rates on government securities fell
apace with the Riksbank's holdings increasing from 2015 to 2017, but he shows
that the rate fell on the shortest maturities. At the end of 2017, the rate on
government securities with short maturities was between 20 and 35 basis points
lower than the Riksbank's policy rate, depending on the measure used (see Figure
2).6
Event studies show that the rate on government bonds fell by 30-50 basis points
in total as a result of the Riksbank's purchases during 2015-2017. Erikson's study
indicates that the entire decline in long-term interest rates occurred as a result of
the short-term interest rates on government securities being pushed down and
expected to remain so. The interest rate effect appears to have arisen through a
general shortage of government securities (a negative liquidity premium, even on
the very shortest maturities) rather than the term premiums being pushed down.
If our purchases entailed lower premiums on government bonds, the rate on
government bonds should have fallen in relation to the expected average policy rate
over the maturity of the bond. One way of examining this is to compare the rate
on government bonds with expectations of the future policy rate, as in the left
panel of Figure 3.7 We see a clear fall in the interest rate differential of about 20
basis points when purchases started in early 2015 and then a further fall around
2017. This way of looking at data thus also supports the conclusion that the
Riksbank's purchases pushed down the rate on government bonds by around 35 basis
points.
Figure 2. The rate on short government securities was lower than the policy rate
SEK billion and basis points respectively (left figure ) and per cent (right figure)
Note. The blue field shows the volume of nominal government bonds owned by others than
the Riksbank. Interest on repo transactions for nominal government bonds relative to the
policy rate. The interest rate on repo transactions that pass over the end of the year may be
affected by year-end effects. These rate listings have been removed. The expected policy rate 3
months ahead is based on STINA contracts combined with STIBOR T/N and the policy rate. Both
this series and the rate on treasury bills are shown as 10-day moving averages.
Sources: Nordea markets, the Swedish National Debt Office and the Riksbank.
The right-hand panel in Figure 3 instead compares the rate on covered bonds with
the expected policy rate.8 According to the portfolio balance sheet theory,
purchases of government bonds can also push down rates on other bonds with
similar maturities, such as covered bonds. But it is difficult to see any such effect in
Figure 3.9 During 2015, the rate on covered bonds instead rose in relation to the
expected policy rate. Later during the purchase period, the interest rate
differential declined, but to approximately the same level as before the start of the
purchases.
What conclusions can we draw from these observations?
First, we have already observed that the rate on short government securities was
lower than the policy rate. This reasonably means that, although the policy rate
was cut to -0.50 per cent in 2016, it was not at its technical lower bound.10 The
Riksbank's asset purchases meant that two short market rates were established,
the Riksbank's policy rate, which was still indicative of pricing in the interbank
market, and the even lower rate on short government securities, which also led to
a fall in the rate on longer-term government securities.
Figure 3. Government bonds and covered bonds against expected policy rate
Basis points
Note. Differential between rate on each bond and expected policy rate. Refers to bonds with a
maturity of 5 years and an expected policy rate of 5 years ahead. Footnote 7 explains how the
expected policy rate is calculated.
Sources: Bloomberg, Macrobond, Refinitiv and the Riksbank.
A relevant question is whether the Riksbank could have achieved the same effect
by cutting the policy rate to -0.80 per cent instead of buying government bonds. I
am unsure of the answer, but suspect that the effects would then have been
different. Perhaps a lower policy rate had more clearly affected lending rates and
also pressured the banks' profitability, but had similar effects on the exchange
rate, something I will come back to in a moment.11 I also suspect that the Riksbank
would have found it more difficult to communicate an even more negative policy
rate.
Second, this pricing indicates that government securities began to be valued
higher than central bank money when the purchases started. Investors bought
government securities with lower interest rates than the rate paid on Riksbank
Certificates and deposits overnight at the Riksbank. Another common idea is that
the central bank adds value by providing liquidity and reducing the term premium
when purchasing government securities in exchange for more coveted central
bank money. This does not seem to have been the case in Sweden. Both the
Riksbank and the Swedish National Debt Office judged that the term premium was
close to zero, or negative, when the Riksbank's purchases began and that the
overall term and liquidity premiums subsequently became negative.12
Unclear whether lower long-term interest rates are a stimulus in the
Swedish economy
Third, it is doubtful whether lower interest rates on longer maturities stimulates
demand in the Swedish economy. Unlike the US economy, for example, the
Swedish financial market is dominated by short-term interest rates. Most bank
lending to both households and companies takes place at variable interest rates, and
in the bond market, rates are often variable.13 Household and corporate
consumption and investment decisions should therefore be primarily affected by
short-term market interest rates and expectations of future short-term interest
rates, while the acquisition of assets that push down the term premium should be
less important.
Despite the very short interest-rate fixation periods on household and corporate
loans, the Riksbank's purchases could have an effect if they lower bank funding
costs. An important source of funding for the banks is the market for covered
bonds. Banks issue such bonds, often with a maturity of 2-5 years, mainly to
finance household mortgage loans. Thus, even though the mortgage loans usually
have a short interest-rate fixation period, lower premiums (i.e. lower interest
rates and higher prices) on covered bonds could push down the bank funding
costs and thus lead to lower lending rates. However, as I noted above, the
premiums on covered bonds do not appear to have been affected when the Riksbank
bought government bonds during 2015-2019.
This argument becomes even clearer when one looks at how the banks' actual
lending rates to households and companies developed during the period. If the
acquisition of assets had had an important effect on the interest rates that
households and companies encounter, we should have seen that lending rates to these
fell more than the policy rate was reduced in 2015-2019. However, Figure 4 shows
that the difference between these rates and the Riksbank's policy rate does not
appear to have been affected by the asset purchases.14
Government bond purchases thus appear to have pushed down the interest rate
on government bonds to a certain limit. However, there are no signs that this
caused households and companies to encounter lower interest rates. It is
therefore very unclear whether the result was that the economy was stimulated via the
interest rate channel.15
Figure 4. Lending rates have followed the policy rate
Per cent
Note. The Riksbank's policy rate and average lending rates from monetary financial institutions
to households and companies, new agreements, all interest-fixation periods.
Sources: Statistics Sweden and the Riksbank.
Unclear whether the Riksbank's purchases contributed to the krona
remaining weak
One of the motives behind the Riksbank's acquisition of assets was to avoid the
krona strengthening in a situation where inflation was already too low. In that
case, inflation would have been pushed down by lower import prices and the
demand for Swedish export products would have fallen. This would have brought
down economic activity, which would have further dampened inflationary
pressures. Since other central banks also had large purchase programmes, the
Riksbank's intention was precisely to avoid the krona becoming too strong, not to
weaken it.16
It is hardly possible to say with precision how the Riksbank's acquisition of assets
affected the exchange rate. The analysis is complicated by, among other things,
the fact that the Riksbank published decisions on the asset purchases at the same
time as decisions on the policy rate.17 One indication that the purchases had the
intended effect is that the krona did not strengthen but weakened, despite the
fact that the ECB's monetary policy became increasingly expansionary through
both interest rate cuts and extensive asset purchases.
However, it is difficult to see any clear evidence that the effect arose as a result of
the Riksbank's purchases, for example by foreign investments being crowded out
of the Swedish market during this period. Although foreign investors' holdings of
Swedish government bonds decreased in line with the Riksbank's purchases, their
total holdings of Swedish bonds do not appear to have declined (see Figure 5).
Note. Ownership of certificates and bonds denominated in SEK. "All" includes paper issued by
the state, banks, municipalities and companies and also covered bonds.
Source: Statistics Sweden.
Asset purchases strengthened confidence in the inflation target
Asset purchases can also affect the economy through a signalling channel. The
academic research often assumes that the central bank wants to avoid financial
losses. The central bank can then with the aid of the asset purchases credibly
promise to keep the policy rate low for a long time, since the assets the central
bank has purchased would fall in value if the interest rate was raised. As far as I
know, however, no central bank has communicated in this way. The recent rapid
interest rate increases show instead that the central banks do not hesitate to raise
interest rates, despite the fact that this entails losses on their balance sheets.
Bernanke (2020) says that the signalling channel has been important, but thinks
that it works differently. According to him, market participants rely more on
central banks' communication on future asset purchases than on their
communication on future interest rate decisions. In addition, they expect the central bank not
to raise the policy rate while an asset purchase programme is still in progress. By
communicating a purchase programme with a certain duration, the central bank
can therefore keep interest rate expectations low.18
Signalling in this way has hardly been important in Sweden, at least not as a
conscious strategy on the part of the Riksbank. This is because the market's interest
rate expectations during much of this period were lower than the forecast for the
policy rate published by the Riksbank. This was most evident when the purchases
started in February 2015, as shown in Figure 6. If our ambition was to push down
expectations of the future policy rate, this should have been reflected in a lower
forecast for the policy rate.19
Figure 6. The market already expected lower policy rates than the Riksbank
Per cent
Note. Solid lines refers to outcomes. The red broken line refers to the market pricing just
before the monetary policy meeting in February 2015, the blue broken line refers to the
Riksbank's forecast in the Monetary Policy Report in February 2015.
Source: The Riksbank.
In Sweden, the signalling instead seems to have functioned in a completely
different way. During 2013 and 2014, it became increasingly common for various
agents in the Swedish debate to question whether the Riksbank placed sufficient
emphasis on bringing inflation up to the 2 per cent target. But the combination of
asset purchases and negative policy rate seemed very powerful. In 2015, the
picture of the Riksbank's priorities therefore changed rapidly. There was no longer
any doubt that the Riksbank was prepared to use all possible means to safeguard
the credibility of the inflation target.
It has probably been clear from my earlier statements that I have some doubts
about whether the purchases of government bonds significantly stimulated the
Swedish economy and thereby contributed to raising inflation. But I think this
signalling effect was important, and more important than I realised when we started
the purchases.
To sum up, the purchases of government bonds from 2015 up to the pandemic
seem to have pushed down the rate on government bonds over the entire yield
curve by at least 30 basis points. However, this effect on interest rates is small in
relation to the size of the purchases, and there are no clear indications that it led
to a fall in the financing costs of households and companies. On the other hand,
the purchases seem to have contributed to the strengthening of confidence in the
inflation target via a signalling channel and possibly also to the krona remaining
relatively weak during the period. Although I believe that decisions and
communication on the policy rate were much more important, the asset purchases may
have contributed to a certain extent to both inflation and inflation expectations
rising from 2015 to 2017 and then remaining close to 2 per cent for a few years
(see Figure 7).
Figure 7. Inflation rose toward the target in 2015-2017 and confidence in the
inflation target strengthened
Per cent
Note. Inflation according to CPIF. Market expectations refer to a 5-year period starting in 5
years' time, calculated from bond yields, 30-day moving average. Money market participants
refers to expected inflation in 5 years according to Prospera's survey. Both market expectations
and expectations from Prospera refer to inflation according CPI.
Sources: Kantar Prospera, Statistics Sweden and the Riksbank.
Phase 2a: The acute phase of the coronavirus crisis - broader
purchases of securities for continued market functioning
On 11 March 2020, the World Health Organisation (WHO) announced that
Covid19 would be considered a pandemic. Many were, of course, concerned about
health risks, but many were also concerned about how the economy would be
affected. International economic prospects weakened rapidly. Many economies
closed down almost completely and service sectors in particular were hit hard. It
was very uncertain how long the pandemic would last and how households and
companies would get through it.
In this situation, both central banks and other authorities reacted quickly, and
comprehensive support packages were presented. The aim was often to facilitate
the overwintering of companies so that their operations could be restarted once
the economies had reopened.
The Riksbank saw a risk that the great uncertainty would mean that households
and companies would encounter ever higher interest rates on their loans and that
this would impair their ability to cope with the pandemic. In March and early April
2020, this risk was reflected in, among other things, the fact that interest rates on
mortgage and corporate bonds began to rise rapidly and that the markets for
these bonds were functioning poorly. The risk was therefore that concern over
weak economic developments with more and more payment defaults would be
self-fulfilling through a vicious circle, where rising risk premiums lead to
ever-increasing problems and even higher interest rates.
Given this, the Riksbank focused its measures on ensuring that there was good
access to liquidity and that the financial markets continued to function. We did not
see it as meaningful to stimulate demand in an economy that was largely closed;
instead, the ambition was to avoid tightening financial conditions and, in the long
run, to avoid the great uncertainty causing a financial crisis.
Among the measures we decided at a number of ordinary and extraordinary
meetings were broader and substantially extended asset purchases.20 At the
monetary policy meetings in April and June 2020, these measures were consolidated
in a programme where assets worth SEK 500 billion would be purchased by
mid2021. The purchases now included not only government bonds, but also covered
bonds, municipal bonds and corporate bonds.21
Since many actors at the same time put in place a variety of support measures, it
is almost impossible to evaluate the effects of an individual measure. However, I
do draw some conclusions.
The support measures during the pandemic were important and worked
very well
First, I think it is clear that the overall measures worked very well. Risk premiums
in the financial markets began to fall rapidly in April, and the pandemic did not
lead to a financial crisis either in Sweden or abroad. Although economic activity
slowed down rapidly in the second quarter of 2020, the decline in many areas was
slightly smaller than was feared during the spring and, above all, the economies
began to recover quickly later in the year (see Figure 8). It is unusual for a
recession to be so short-lived. Without the comprehensive support programmes, the
development would probably have been quite different.
Figure 8. Quick recovery after the pandemic
Index, 2019 Q4= 100 respective percentage of population aged 15-74 years
Note. Seasonally adjusted data.
Sources: Statistics Sweden and the Riksbank.
Second, purchases of bonds other than government bonds appear to have pushed
down the rates on these bonds. The left-hand panel in Figure 9 shows that rates
on covered bonds and local government and corporate bonds fell more than the
rate on government bonds after the Riksbank had presented its purchase plans.
The figure shows that the risk premiums on these assets were also lower than
before the pandemic, which was hardly the intention of the measures.22,23 This
indicates that market participants now considered that the authorities had entered
the market as guarantor of the risks on these markets.
Figure 9. Interest rate premiums on bonds were pushed back during the pandemic
and mortgage ratesfell marginally
Basis points and per cent
Note. The bond rates refer to a 5 year maturity, difference against the expected policy rate
(see footnote 7). Mortgage rates are an average of actual rates for new and renegotiated
mortgages from Länsförsäkringar Bank, Nordea, SBAB, SEB, SHB and Swedbank.
Sources: Bloomberg, Macrobond, Refinitiv, respective mortgage agents and the Riksbank.
The housing market developed unexpectedly strongly during the
pandemic
Third, there are indications that the unusually low risk premiums for covered and
corporate bonds had an impact on the behaviour of households and companies.
The right panel in Figure 9 shows that the interest rate on household mortgage
loans fell marginally in 2020 and 2021, despite the Riksbank having raised the
policy rate just before the pandemic.
In spring 2020, we feared that the housing and property markets - where
indebtedness was high and where growth had been rapid - could be severely affected
by the pandemic, which could ultimately jeopardise financial stability.24 However,
the support measures, partly through expectations of continued low interest rates
and easing the amortisation requirements from Finansinspektionen, seem instead
to have contributed the housing market in particular developing strongly (see
Figure 10).
To summarise, the Riksbank's purchases during the pandemic functioned
differently from those before the pandemic. This is not surprising. During spring 2020,
the Riksbank entered as buyer into markets which, due to the high level of
uncertainty, were functioning poorly when many wanted to sell and few wanted to buy.
Moreover, the Riksbank began to buy bonds issued by private agents (mainly
banks). The Riksbank thus took over risk from market participants. This is unlike
the situation prior to the pandemic, when the Riksbank's purchases meant that
one government asset (government bonds) was removed from the market but
was replaced by another asset with a similar risk profile (reserves at the Riksbank).
Figure 10. House prices in Sweden and abroad
Annual percentage change and index respectively, 2019-12 = 100
Note. Housing prices refer to the HOX Sweden price index for tenant-owned apartments and
detached houses.
Sources: EUROPACE, Lloyds Banking Group, Real Estate Norway, S&P Global and Valueguard.
Phase 2b: Extended purchases with greater elements of broad
economic stimulus
The aim of the Riksbank's measures was thus to prevent problems on the financial
markets from further exacerbating the country's economy in the middle of the
pandemic, which was thus successful. On the other hand, the ambition was not to
completely eliminate risk premiums in the financial markets, nor to contribute to
rapidly increasing asset prices. It is therefore hardly controversial to note that the
effects of the overall support measures were greater than intended.
As I have already pointed out, developments in the housing market in particular
were surprisingly strong. It was, of course, important for the housing market that
the rise in risk premiums was interrupted so that credit provision was sustained
and interest rates on household mortgage loans did not start to rise. The fact that
the risk premiums for covered bonds in addition were lower than prior to the
pandemic may have contributed to the rise in housing prices, but this was hardly the
most important factor. For example, housing prices rose rapidly in many other
countries, and also in countries where central banks did not purchase mortgage
bonds (see Figure 10).25 A more important explanation for the price increase was
probably that demand for housing increased during the pandemic, when many
began planning for a future where they could work from home to a greater
extent.26
Asset purchases should have been concluded earlier
However, whatever measures were behind this development, I believe that we
could have responded to this information in autumn 2020. I am thinking in
particular of our monetary policy meeting in November 2020, when we decided to
extend and prolong the asset purchase programme. The main elements of the
change were that the framework for the total purchases of assets under the
programme was extended from SEK 500 billion to SEK 700 billion and that purchases
would continue until the end of 2021 instead of the end of the first half of 2021.
At this time, it was still very uncertain how the pandemic would develop and how
it would in turn affect the economy. Although the economy had begun to recover
after the closures during the start of the pandemic, the spread of infection had
gained new momentum in the run-up to the monetary policy meeting and
uncertainty in the financial markets increased again. Despite this, one could see that
the support measures had had the effects on risk premiums and housing prices I
described above; the risk premiums were lower than before the pandemic and
housing prices had started to rise clearly, after falling during the start of the
pandemic.27
It is not possible to say with certainty how the economy would have developed if
we had not decided in November 2020 to extend and prolong the asset purchase
programme. As the pandemic still had a significant impact on economic activity
and contributed to market uncertainty, continued support measures were
justified. However, the financial markets were functioning well and the yield curve
was low and flat. The asset purchase programme that we had already decided and
which was due to run until mid-2021 seemed, in my view, sufficient to deal even
with increasing uncertainty.28
Rapid rise in inflation and a reversal of monetary policy
2022
Inflation has risen rapidly this year and is now far too high. The Riksbank has
therefore raised the policy rate, and other interest rates have followed. The
higher interest rates mean that the value of the assets we have purchased falls
and that the Riksbank will report a large financial loss this year
I want to use my (long!) review of the experience of asset purchases since 2015 to
try to evaluate whether financial losses are offset by other gains for the national
economy. I shall also discuss whether the losses will weaken the Riksbank's
financial independence and, in that case, make monetary policy less effective.
But let me first focus a little more on the financial losses. How has the Riksbank's
balance sheet been affected by the purchase of assets, and how has the value of
the assets we have purchased developed?
The Riksbank's financial results are now deteriorating
Prior to the global financial crisis, the Riksbank's balance sheet was relatively small
and uncomplicated. The size of the balance sheet, corresponding to
approximately 6 per cent of GDP, was determined mainly by the liabilities side, which was
dominated by banknotes and coins in circulation and the Riksbank's equity. On
the assets side, these liabilities were matched by the foreign exchange reserve,
which consisted mainly of US and European government bonds. The liabilities side
was therefore mainly not remunerated (we do not pay any interest on notes and
coins), while we collected interest on government bonds. With interest rates
around 4 per cent, the Riksbank could finance its current operations and yet
deliver a surplus of several billion SEK a year to the central government budget.
Today, the balance sheet looks completely different (see Figure 11). The balance
sheet total now corresponds to 28 percent of GDP, and the liabilities side is
dominated by debt securities. And since the debt has a very short maturity (overnight
or one week) while the bonds on the asset side have long maturity,