The Aggregate Demand for Treasury Debt

2012/04/01 by Arvind Krishnamurthy, Annette Vissing-Jorgensen, Annette Vissing‐Jørgensen · 1,589 citations
Economics, Econometrics and Finance · #Banking stability, regulation, efficiency #Business #Credit Risk and Financial Regulations #Debt #Economics #Finance #Financial Markets and Investment Strategies #Liquidity crisis #Liquidity risk #Market liquidity #Monetary economics #Treasury #Yield (engineering)

paper · open access · doi:10.1086/666526

published in Journal of Political Economy 120(2), 233-267 (University of Chicago Press)

openalex publication_date 2012/04/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/06

Abstract

Investors value the liquidity and safety of US Treasuries. We document\nthis by showing that changes in Treasury supply have large effects on\na variety of yield spreads. As a result, Treasury yields are reduced by\n73 basis points, on average, from 1926 to 2008. Both the liquidity and\nsafety attributes of Treasuries are driving this phenomenon. We document\nthis by analyzing the spread between assets with different liquidity\n(but similar safety) and those with different safety (but similar\nliquidity). The low yield on Treasuries due to their extreme safety and\nliquidity suggests that Treasuries in important respects are similar to\nmoney.

Citations

• The Flight‐to‐Liquidity Premium in U.S. Treasury Bond Prices

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