Risk-Free Interest Rates
Jules van Binsbergen (),
William Diamond and
No 26138, NBER Working Papers from National Bureau of Economic Research, Inc
We estimate risk-free interest rates unaffected by convenience yields on safe assets. We infer them from risky asset prices without relying on any specific model of risk. We obtain a term structure of convenience yields with maturities up to 2.5 years at a minutely frequency. The convenience yield on treasuries equals about 40 basis points, is larger below 3 months maturity, and quadruples during the financial crisis. In high-frequency event studies, conventional and unconventional monetary stimulus reduce convenience yields, particularly during the crisis. We further study convenience-yield-free CIP deviations, and we show significant bond return predictability related to convenience yields.
JEL-codes: E41 E43 E44 E52 E58 G12 G15 (search for similar items in EconPapers)
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Working Paper: Risk-Free Interest Rates (2019)
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