The U.S. Treasury Premium

By Wenxin Du, Jonsson Im, Jesse Schreger. 2017

110 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/5795c6e906483518e8a35fab4a5e9e847bf770ea

Citations in the corpus

• An Event Study of COVID-19 Central Bank Quantitative Easing in Advanced and Emerging Economies (2020, unknown): “We also note that the 10-year sovereign bond markets in advanced economies are among the most liquid and efficient (Du, Im, and Schreger, 2018), and during crisis times they often become safe-havens, although COVID-19 briefly disrupted the U.S. government bond market in mid-March 2020.”