The Aggregate Demand for Treasury Debt

2012/04/01 by Arvind Krishnamurthy, Annette Vissing-Jorgensen, Annette Vissing‐Jørgensen · 12 citations
Economics, Econometrics and Finance · #Credit Risk and Financial Regulations #Banking stability, regulation, efficiency #Financial Markets and Investment Strategies

paper · doi:10.1086/666526

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

Cited by

• US Public Debt and Safe Asset Market Power
• Presidential Address: Discount Rates
• Foreign Safe Asset Demand and the Dollar Exchange Rate
• Government Intervention and Strategic Trading in the U.S. Treasury Market
• Monetary Policy for a Bubbly World
• The Deposits Channel of Monetary Policy*
• A century of capital structure: The leveraging of corporate America
• A review on ESG investing: Investors’ expectations, beliefs and perceptions
• Preferred habitats and timing in the world’s safe asset
• The Economics of Sovereign Debt, Bailouts, and the Eurozone Crisis
• Government debt and risk premia
• Quantitative easing and the supply of safe assets: Evidence from international bond safety premia
• The term structure of equity risk premia

Related

• The Flight‐to‐Liquidity Premium in U.S. Treasury Bond Prices
• Equity Tail Risk in the Treasury Bond Market
• How Does Monetary Policy Influence the U.S. Treasury Bond Yields, and What are the Implications for Portfolio Managers?
• Government Intervention and Strategic Trading in the U.S. Treasury Market
• Visualizing Treasury Issuance Strategy