The asymmetric effects of quantitative tightening and easing on financial markets ☆

We study the asymmetric impact of US quantitative tightening (QT) and easing (QE) on financial markets using high -frequency large-scale asset purchase surprises around FOMC announcements. We document that QT surprises since 2017 had larger and more persistent effects on US Treasury yields than QE surprises. Using numerous empirical decompositions of bond yields, we show that this asymmetry arises from the differential effect of QT vs. QE surprises on expectations of future short-term rates (linked to the so-called signalling channel) at shorter maturities.