The U.S. Treasury Premium

Wenxin Du, Joanne Im and Jesse Schreger

No 23759, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: E4 F30 G12 G15 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-fmk and nep-mac
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Published as The U.S. Treasury Premium , Wenxin Du, Joanne Im, Jesse Schreger. in NBER International Seminar on Macroeconomics 2017 , Frankel, Rey, and Engel. 2018
Published as Wenxin Du & Joanne Im & Jesse Schreger, 2018. "The U.S. Treasury Premium," Journal of International Economics, .

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