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Treasury Richness

Author

Listed:
  • Matthias Fleckenstein
  • Francis A. Longstaff

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.

Suggested Citation

  • Matthias Fleckenstein & Francis A. Longstaff, 2021. "Treasury Richness," NBER Working Papers 29081, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29081
    Note: AP
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    File URL: http://www.nber.org/papers/w29081.pdf
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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