Euro Area Banks Pass on Excess Reserves, Impacting Bond Yields
The study looked at how European banks handled extra money from the European Central Bank's QE program. They found that banks didn't want to keep too much money because of low interest rates, so they quickly passed it on to other banks. This caused a lot of movement in bank reserves each month. Instead of using the extra money to make loans, banks mostly bought debt securities. This shifting of money likely affected European bond prices differently than what was previously thought.