Treasury Richness

Matthias Fleckenstein and Francis Longstaff

No 29081, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: It is widely believed that Treasuries trade at premium prices because of their safety and money-like properties. In reality, this is only true on a relative basis when compared to other bonds, but is often not true on an absolute basis. Many Treasuries have repeatedly traded at substantial discounts to their intrinsic fair values for extended periods during the past 25 years. Since 2015, Treasuries have consistently been priced at an aggregate discount of $100 to $300 billion below their fair values. Treasuries often actually become cheaper following crises. These results provide new perspectives on safe-asset theories.

JEL-codes: G12 (search for similar items in EconPapers)
Date: 2021-07
New Economics Papers: this item is included in nep-isf
Note: AP
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Published as MATTHIAS FLECKENSTEIN & FRANCIS A. LONGSTAFF, 2024. "Treasury Richness," The Journal of Finance, vol 79(4), pages 2797-2844.

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