International Capital Flows and Bond Risk Premia

Jesus Sierra ()
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Jesus Sierra: Financial Markets Department, 234 Laurier Avenue West, Ottawa, ON K1A 0G9, Canada

Quarterly Journal of Finance (QJF), 2014, vol. 04, issue 01, 1-36

Abstract: We investigate whether foreign purchases of long-term U.S. Treasury securities significantly affect their expected excess-returns. We run predictive regressions of realized excess returns on measures of net purchases of treasuries by both foreign official and private agents. We find that official flows, with a negative effect, appear similar to relative supply shocks; private flows, with a positive impact, resemble flows that absorb excess-supply and are thus compensated for this service, similar to the role of arbitrageurs. The results are robust to out-of-sample tests and the use of benchmark survey-consistent adjusted flows data.

Keywords: Bond risk-premia; capital flows; international financial markets; G110; G120; G150; F310; F320; F340; C220 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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DOI: 10.1142/S2010139214500013

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