Treasury inconvenience yields during the COVID-19 crisis

• 成果类型: Article
• 署名作者: He, Zhiguo; Nagel, Stefan; Song, Zhaogang
• 署名单位: University of Chicago; National Bureau of Economic Research; Johns Hopkins University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.05.044
• 发表日期: 2022
• 页码: 57-79
• 关键词: Habitat agents; Primary dealers; Repo; Safe asset; Treasury yield

摘要

In sharp contrast to most previous crisis episodes, the Treasury market experienced severe stress and illiquidity during the COVID-19 crisis, raising concerns that the safe-haven status of US Treasuries may be eroding. We document large shifts in Treasury ownership and temporary accumulation of Treasury and reverse repo positions on dealer balance sheets during this period. We build a dynamic equilibrium asset pricing model in which dealers subject to regulatory balance sheet constraints intermediate demand/supply shocks from habitat agents and provide repo financing to levered investors. The model predicts that Treasury inconvenience yields, measured as the spread between Treasuries and overnight-index swap rates (OIS), as well as spreads between dealers' reverse repo and repo rates, should be highly positive during the COVID-19 crisis, as is confirmed in the data. The same model framework, adapted to the institutional setting in 20 07-20 09, can also explain the negative Treasury-OIS spread observed during the Great Recession. (c) 2021 Elsevier B.V. All rights reserved.