Regulatory Alerts2026-05-28
Added · Updated
Bank and Hedge Fund Bond Purchases Have Dampened the Effects of Riksbank's Quantitative Tightening
Sveriges Riksbank economists Erik Andersson and Peter Kaplan argue that the limited impact of quantitative tightening on bank deposits and risk premiums is due to absorption by banks and hedge funds. These entities maintained stable deposit levels by replacing central bank liquidity with bonds, with hedge funds largely financing purchases through repurchase agreements. Consequently, the contractionary effects on the economy have been muted, although rising repo rates suggest potential future shifts if financing conditions tighten.
Topics
monetary
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