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Faculty & Research

Intermediary Balance Sheets and the Treasury Yield Curve - Wenhao Li

29 Sep
2022
2:00 pm
Jouy-en-Josas
English

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2022-09-29T14:00:00 2022-09-29T15:00:00 Intermediary Balance Sheets and the Treasury Yield Curve - Wenhao Li Finance Speaker : Wenhao Li (USC)   Jouy-en-Josas

Finance

Speaker : Wenhao Li (USC)

 

We document a regime change in the U.S. Treasury market post-Global Financial Crisis (GFC): dealers switched from net short to net long bonds. Consistent with this change, we derive bounds on yields that account for balance sheet costs, the net short and net long curves, and show that actual yields moved from the net short curve pre-GFC to the net long curve post-GFC. This regime change helps explain negative swap spreads and the co-movement among swap spreads, dealer positions, yield curve slope, and covered-interest-parity violations, and implies changing effects for a wide range of monetary and regulatory policy interventions.

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2022-09-29T14:00:00 2022-09-29T15:00:00 Intermediary Balance Sheets and the Treasury Yield Curve - Wenhao Li Finance Speaker : Wenhao Li (USC)   Jouy-en-Josas