Preferred Habitats and Timing in the World’s Safe Asset

Alexandra M. Tabova and Francis E. Warnock

No 30722, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We build the first-ever comprehensive security-level dataset on the size, flows, coupon payments and returns of foreign and U.S. investors’ Treasury portfolios. Private U.S. and private foreign investors hold longer-duration higher-return Treasuries, whereas foreign governments hold shorter-duration lower-return Treasuries, so all else equal private investors should earn higher returns than foreign governments. But all else is not equal. Foreign governments, even with their low-returns low-volatility portfolios, actually earn higher returns because U.S. and foreign private investors’ returns are substantially reduced by poor timing. Moreover, we find that foreigners beat the (non- Fed) market, while U.S. investors earn a small and insignificant 19 basis points less than market returns. From our analysis, no investor-type earns significantly less than the (non-Fed) Treasury market, indicating that differential investors are not the source of the convenience yield. In terms of investor behavior more broadly, our novel dataset allows a direct comparison of the different investors in the Treasury market. Foreign private investors are similar to U.S. private investors and both behave differently and have different preferred habitats than governments.

JEL-codes: F30 G11 G12 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-cba
Note: AP EFG IFM
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w30722.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:30722

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w30722

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().