At the same time the Treasury and other government and quasi government borrowers have borrowed money at an average interest rate of about 2percentt.
In Italy, weak demand for bonds pushed yields back above the critical 7 percent threshold, a level that has prompted other government borrowers to seek bailouts.
Wednesday's infusion could also help reduce the pressure on beleaguered government borrowers on the periphery of the Continent, most significantly Italy and Spain.
"Banks' exposure to local government borrowers is greater than we anticipated," Yvonne Zhang, a Moody's analyst, said in a statement.
The rating agency Moody's has recently reaffirmed the Cayman Islands' Aa3 credit rating – one of the highest of all government borrowers.
The prospect of slower growth across the Continent, and fears that budget deficits will balloon, is a major reason the selling has spread beyond Italian bonds to much stronger government borrowers with AAA credit ratings like France.
But in a separate paper Mr Krishnamurthy and Ms Vissing-Jorgensen argue that, by reducing the available supply of sovereign debt, QE raises the premium investors place on the safety and liquidity of government borrowers.
A recent study by the World Bank found that in two poor states in India where the financial system is largely controlled by the government, borrowers paid bribes to officials amounting to between 8% and 42% of the value of their loans.
These people assert that the central bank, its assurances aside, is concerned about taking on so many bonds of peripheral European countries — and being forced into what would be a de facto bailout of overextended government borrowers and the banks that bought their bonds.
Despite those twin threats, German political leaders have opposed any outright bailout either for the banking system or for troubled government borrowers like Italy and Spain, whose free-spending ways have long irked voters in Germany, Europe's largest economy and a principal financier of any bailouts.
