Unconventional Monetary Policy: Exit Strategy (5)

Reaction of the Financial Markets to the Start of Unwinding

This raises the question of the reaction that financial markets might have to the start of the unwinding of the direct easing measures. 

1.   How would markets react to the central bank starting to sell the government bonds it purchased under the direct quantitative easing policy? 

Such a start would signal presumably that the tightening cycle is close and could affect yields. 

2.  If the amount of assets to be sold is significant, this can have an impact on the market conditions of the underlying assets, possibly further depressing its price.