How much bond can central banks buy?
• Central banks have routinely bought and sold securities as part of their
• But the present scale of their involvement is unprecedented
• The US Fed’s holding of treasuries, as a share of total outstanding, has risen
from less than 14% at end-2019 to close to 24% presently
• Bank of Japan’s holding for JGBs has gone from 13% (in 2015) to 45%
• There are many others with striking accumulation as well
• From Indonesia and Philippines to Australia and the UK, central banks
have pushed up their holding of govt securities by several times
• Singapore, South Korea, and Thailand make up the exceptions
• Many central banks’ balance sheets, bloated with government securities,
run the risk of substantial capital losses if interest rates begin to rise.
• There is also risk to their independence