The U.S. Treasury Premium / Wenxin Du, Joanne Im, Jesse Schreger.

Format:

Book

Author/Creator:

Du, Wenxin.

Contributor:

National Bureau of Economic Research.

Im, Joanne.

Schreger, Jesse.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23759.

NBER working paper series no. w23759

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

We quantify the difference in the convenience yield of U.S. Treasuries and the bonds of near default-free sovereigns by measuring the gap between the FX swap-implied dollar yield paid by foreign governments and the U.S. Treasury dollar yield. We call this wedge the "U.S. Treasury Premium." We find that this premium was approximately 21 basis points for five-year bonds prior to the Global Financial Crisis, increased up to 90 basis points during the crisis, and has disappeared since the crisis with the post-crisis mean at -8 basis points. We show the decline in the premium cannot be explained away by credit risk or FX swap market mispricings. In addition, we present evidence that the relative supply of government bonds in the United States and foreign countries affects the premium.

Notes:

Print version record

August 2017.