The U.S. Treasury Premium

Wenxin Du, Joanne Im and Jesse Schreger

Journal of International Economics, 2018, vol. 112, issue C, 167-181

Abstract: We quantify the difference in the convenience yield of U.S. Treasuries and government bonds of other developed countries by measuring the deviation from covered interest parity between government bond yields. We call this wedge the “U.S. Treasury Premium.” We document a secular decline in the U.S. Treasury Premium at medium to long maturities. The five-year U.S. Treasury Premium averages approximately 21 basis points prior to the Global Financial Crisis, increases up to 90 basis points during the crisis, and disappears after the crisis with the post-crisis mean at −8 basis points. Meanwhile, the short-term U.S. Treasury Premium remains positive post-crisis. We discuss the impact of sovereign credit risk, foreign exchange swap market frictions, and the relative supply of government bonds on the U.S. Treasury Premium

Keywords: U.S. Treasuries; Sovereign bonds; Convenience yields (search for similar items in EconPapers)
JEL-codes: F30 G12 G15 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:112:y:2018:i:c:p:167-181

DOI: 10.1016/j.jinteco.2018.01.001

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