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Bond Market Clienteles, the Yield Curve, and the Optimal Maturity Structure of Government Debt

Stéphane Guibaud, Yves Nosbusch and Dimitri Vayanos

No 9407, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We propose a clientele-based model of the yield curve and optimal maturity structure of government debt. Clienteles are generations of agents at different lifecycle stages in an overlapping-generations economy. An optimal maturity structure exists in the absence of distortionary taxes and induces efficient intergenerational risksharing. If agents are more risk-averse than log, then an increase in the long-horizon clientele raises the price and optimal supply of long-term bonds---effects that we also confirm empirically in a panel of OECD countries. Moreover, under the optimal maturity structure, catering to clienteles is limited and long-term bonds earn negative expected excess returns.

Keywords: clientele effects; debt management; government debt; interest rates; preferred habitat (search for similar items in EconPapers)
JEL-codes: E43 G11 G12 H21 H63 (search for similar items in EconPapers)
Date: 2013-03
New Economics Papers: this item is included in nep-mac
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Related works:
Journal Article: Bond Market Clienteles, the Yield Curve, and the Optimal Maturity Structure of Government Debt (2013) Downloads
Working Paper: Bond Market Clienteles, the Yield Curve, and the Optimal Maturity Structure of Government Debt (2013)
Working Paper: Bond Market Clienteles, the Yield Curve, and the Optimal Maturity Structure of Government Debt (2013) Downloads
Working Paper: Bond Market Clienteles, the Yield Curve and the Optimal Maturity Structure of Government Debt (2011) Downloads
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