Granular Treasury Demand with Arbitrageurs

Kristy Jansen, Wenhao Li and Lukas Schmid

No 21079, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We construct a novel dataset of sector-level U.S. Treasury holdings, covering the majority of the market. Using this dataset, we estimate maturity-specific demand functions and elasticities of different investors and the Fed, and integrate them into a dynamic equilibrium model of the Treasury market with risk-averse arbitrageurs. Quantifying the model reveals that (1) there is a steep downward-sloping term structure of Treasury market elasticity; (2) monetary tightening raises term premia due to arbitrageurs interacting with investors exhibiting high cross-elasticities; (3) QE has limited impact unless the Fed credibly commits to sustained balance sheet expansion.

Keywords: Treasury demand; Financial intermediation; Arbitrage; Monetary policy; Quantitative easing (search for similar items in EconPapers)
JEL-codes: E43 E52 G12 (search for similar items in EconPapers)
Date: 2026-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP21079 (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:cpr:ceprdp:21079

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP21079

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().