This paper uses high-frequency data to investigate the effects on the government bond market of the central bank purchases made by Banca d'Italia during the pandemic crisis. The size, persistence, propagation, and state-dependent nature of these effects inform about the capability of purchases to contribute to the stabilization of government bond markets by mitigating the effects of adverse shocks and containing the volatility of prices.
An outright purchase of government bonds compresses yields immediately and in a persistent manner over the trading day. These effects - different from the permanent ones associated with official programme announcements - are driven by a compression of sovereign spreads and help to improve market liquidity; moreover, they turn out to be particularly strong in times of heightened market stress.
