The interest rate effects of government debt maturity

Jagjit Chadha, Philip Turner and Fabrizio Zampolli

No 476, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: Using an empirical model, this paper finds that shortening the average maturity of US Treasury debt held outside the Federal Reserve by one year reduces the five-year forward 10-year yield by between 130 and 150 basis points. Based on a pre-crisis period, these estimates suggest that portfolio balance effects are unlikely to reflect only post-crisis market conditions. These findings also offer a partial explanation for the Greenspan conundrum: the fact that long-term interest rates in the mid-2000s rose less than expected after a rise in the Fed fund rate may have been due, to some extent, to the concomitant shortening of government debt maturity.

Keywords: government debt; modelling; Federal Reserve (search for similar items in EconPapers)
JEL-codes: E43 E52 E63 (search for similar items in EconPapers)
Date: 2017-08
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Working Paper: The interest rate effects of government debt maturity (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:476

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