What question did this study set out to answer?

This research aims to explore how the supply of Treasury debt influences its yield and investor behavior.

April 1, 2012Open Access

The Aggregate Demand for Treasury Debt

Key Points

This research aims to explore how the supply of Treasury debt influences its yield and investor behavior.
Analyzed the relationship between Treasury supply and yield spreads between different assets.
Examined liquidity and safety characteristics of Treasuries versus other assets.
Used historical data from 1926 to 2008 to document trends in Treasury yields.
Treasury yields decreased by an average of 73 basis points from 1926 to 2008 due to changes in supply.
Significant effects of Treasury supply were observed on various yield spreads, affirming the demand for liquidity and safety.
The findings indicate that Treasuries function similarly to money in terms of investor demand.

Abstract

Investors value the liquidity and safety of US Treasuries. We document by showing that changes in Treasury supply have large effects on variety of yield spreads. As a result, Treasury yields are reduced by73 basis points, on average, from 1926 to 2008. Both the liquidity and attributes of Treasuries are driving this phenomenon. We document by analyzing the spread between assets with different liquidity (but similar safety) and those with different safety (but similar). The low yield on Treasuries due to their extreme safety and suggests that Treasuries in important respects are similar to.

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Cite This Study

Krishnamurthy et al. (Sun,) studied this question.

synapsesocial.com/papers/69de59da1d9bba5129b0bf2f https://doi.org/https://doi.org/10.1086/666526

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