Granular Treasury Demand with Arbitrageurs

Kristy A.E. Jansen, Wenhao Li and Lukas Schmid

No 33243, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We construct a novel dataset of sector-level U.S. Treasury holdings, covering the majority of the market. Using this dataset, we estimate maturity-specific demand functions and elasticities of different investors and the Fed, and integrate them into a dynamic equilibrium model of the Treasury market with risk-averse arbitrageurs. Quantifying the model reveals that (1) strong arbitrage leads to an elastic Treasury market and a steeply downward-sloping term structure of market elasticity; (2) monetary tightening raises term premia due to arbitrageurs interacting with investors exhibiting high cross-elasticities; (3) QE has limited impact unless the Fed credibly commits to sustained balance sheet expansion.

JEL-codes: G12 (search for similar items in EconPapers)
Date: 2024-12
Note: AP PE
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w33243.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:33243

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w33243
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().