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What is Driving the Return Spread Between “Safe” and “Risky” Assets?

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Listed:
  • Emmanuel Farhi
  • Francois Gourio

Abstract

Real interest rates on U.S. government bonds have declined persistently since the 1980s. U.S. government bonds are backed by the full faith and credit of the federal government and, hence, are considered one of the safest assets because the risk of default is extremely low. More broadly, interest rates on other safe assets, such as highly rated corporations, have also declined.

Suggested Citation

  • Emmanuel Farhi & Francois Gourio, 2019. "What is Driving the Return Spread Between “Safe” and “Risky” Assets?," Chicago Fed Letter, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhle:00105
    DOI: 10.21033/cfl-2019-416
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    References listed on IDEAS

    as
    1. M. Marx & B. Mojon & F. Velde, 2017. "Why Have Interest Rates Fallen far Below the Return on Capital," Working papers 630, Banque de France.
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