Overnight rate and signalling effects of central bank bills

We analyse the impact of interest-bearing central bank bills on financial market variables in Switzerland. The unique institutional setting allows us to identify causal effects two orthogonal shocks occurring days with bill auctions through heteroscedasticity: an overnight interest rate shock and a signalling shock. first raises modestly appreciates exchange rate. more strongly. In addition, it lowers stock prices, long-term rates, as well inflation expectations, corporate bond spreads. is economically important for forward-looking than results suggest that liquidity-absorbing operations between official monetary policy decisions affect by revealing information about bank’s future actions.