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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

FMG Discussion Papers from Financial Markets Group

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 life cycle 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. But while a welfare-maximizing government caters to clienteles, it does not accommodate fully their demand, and limits issuance of long-term bonds to a level where these earn negative expected excess returns.

Date: 2011-02
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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) 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
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