funds holding asset - backed securities suspended withdrawals from their clients. at the same time, a number of european banks made public their direct or indirect exposures to the us mortgage market, particularly to its sub - prime component. in this environment, market liquidity declined for a number of assets. this was most obvious for the markets directly related to the core of the current turmoil, namely the market for subprime asset - backed securities ( abs ). during the turmoil, the problem of illiquidity however spread much further, first affecting other abs and asset - backed commercial paper ( abcp ), then mortgage - backed securities ( mbs ) and basically all structured credit instruments, such as collateralised debt obligations ( cdo ). the market for government bonds is the only fixed income market in which liquidity has remained fairly good. it should, however, be noted that within the euro area there has certainly been a differentiation among different government bonds : while german bunds have generally remained quite liquid, the liquidity of bonds issued by countries with weaker public finances, such as italy and greece, has at certain point in time been heavily impaired. this has also had an impact on the yield spreads between these government bonds and the benchmark bunds, which in some cases have widened to their highest levels since the introduction of the euro. in money markets the impact of the turmoil was initially felt mainly in the longer - dated unsecured inter - bank market. it can be said that liquidity in the unsecured deposit markets almost completely dried - up in maturities beyond 1 - month ( although it should be noted that these were not the most liquid ones even in “ normal ” times ). these frictions eventually spilled over to the very short - term money markets ( i. e. below one - week ), at first in the us dollar market where banks – particularly, from europe – encountered difficulties in raising shortterm liquidity. early in the morning of thursday 9 august, the tensions spread to the short - term euro money market ( and also to other money markets such as the british pound and the swiss franc markets ) triggering an exceptional fine - tuning operation of the ecb. important factors driving these adverse liquidity developments in the unsecured market were general uncertainty about banks ’ sub - prime exposures and the scope for related write - downs resulting in ever increasing lack of mutual confidence within the banking community. indeed, rising adverse selection together with increased precaution

lemke. and vladu ( 2017 ). for an example of a study that uses loan - level data to confirm that nirp works through a portfolio rebalancing channel and also incentives banks to rebalance their portfolios from liquid assets to credit, see bottero, minoiu, peydro, polo, presbitero and sette ( 2019 ). 5 for example, see brunnermeier and koby ( 2018 ). 6 see cœure ( 2019 ). 7 for a more in - depth discussion of those channels and an empirical assessment, see ecb ( 2019b ). 8 see draghi ( 2019 ). 9 for some examples, see the following studies : albertazzi, altavilla, boucinha, and di maggio ( 2018 ) ; altavilla, canova, and ciccarelli ( 2016 ) ; and benetton and fantino ( 2018 ). 18 / 19 bis central bankers'speeches 10 see demiralp, eisenschmidt, and vlassopoulos ( 2019 ). 11 see altavilla, carboni, and motto ( 2015 ). 12 the macroeconomic impact reported in rostagno et al. ( 2019 ) is broadly comparable with that in ecb ( 2019b ) over a comparable period. 13 for more details, see ecb ( 2019a ). 19 / 19 bis central bankers'speeches