Quantitative easing has cost hundreds of billions of dollars

IN THE decade and a half since the global financial crisis, rich-world central banks have bought trillions of dollars’ worth of bonds in an attempt to stimulate their economies. Now the bill is coming due.

At the last count, America’s Federal Reserve had a paper loss of US$911 billion on its US$8.2 trillion securities portfolio. On Jul 25, the Bank of England said that, under reasonable assumptions, the Treasury will have to transfer about £275 billion (S$469 billion) between 2023 and 2033 to cover the bank’s cash outflows.

On Jul 28, the Bank of Japan surprised markets by lifting its cap on long-term bond yields, from 0.5 per cent to 1 per cent. For every 0.25-percentage-point rise in the yields of Japanese bonds across all maturities, we calculate, the central bank’s vast bondholdings will fall in value by about US$58 billion – an amount worth 1.5 per cent of Japanese gross domestic product (GDP).