The contribution of us bond demand to the us bond yield conundrum of 2004 to 2007: an empirical investigation

Thomas Goda, Photis Lysandrou () and Chris Stewart

No 10719, Documentos de Trabajo de Valor Público from Universidad EAFIT

Abstract: Although the federal funds rate started rising from mid-2004 US long term rates continued to fall. A likely contributory factor to this conundrum was the contemporaneous increase in US bond demand. Using ARDL-based models, which accommodate structural breaks, this paper estimates the impact of demand on US bond yields in the conundrum period. This impact is shown to have been everywhere significantly negative. The fact that our model fully explains the bond yield conundrum gives support to the hypothesis that the US CDO market was rapidly expanded before 2007 chiefly to absorb the overspill of global demand for safe assets.

Keywords: ARDL; bond yields; bond yield conundrum; bond demand; subprime crisis; structural breaks (search for similar items in EconPapers)
JEL-codes: C22 E43 G01 G12 (search for similar items in EconPapers)
Pages: 40
Date: 2011-12-14
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://repository.eafit.edu.co/bitstream/10784/741/1/2011_13_Thomas_Goda.pdf

Related works:
Journal Article: The contribution of US bond demand to the US bond yield conundrum of 2004–2007: An empirical investigation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000122:010719

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