Here's a speech by Benoît Cœuré of the European Central Bank about, among other things, the effects on liquidity of the ECB's Public Sector Purchase Programme of buying European government bonds:
The impact of the PSPP on market liquidity remains an empirical question. And looking at the available data, we do not see evidence of significant disruptions in market functioning.
First, price discovery appears to be smooth and issuers are able to place new securities to the market in large volumes. Trading volumes have not fallen systematically as a result of PSPP. Based on TradeWeb data, trading volumes in core markets such as Germany are roughly 5% lower than two years ago. However, trading volumes in Italian, Spanish and Portuguese bonds on that platform are around 20% higher. That said one should not draw hasty conclusions from what remains a fragile set of indicators. Too little is known of the liquidity offered by dealers to end-investors. And therefore, the ECB will monitor market liquidity carefully as our asset purchase programme is further rolled out.
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