The US Treasury floating rate note puzzle: Is there a premium for mark-to-market stability?
We find that Treasury floating rate notes (FRNs) trade at a significant premium relative to the prices of Treasury bills and notes. This premium is directly related to the near-constant nature of FRN prices and is correlated with measures reflecting investor demand for safe assets. Money market fund...
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| Veröffentlicht in: | Journal of financial economics 2020-09, Vol.137 (3), p.637-658 |
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| container_end_page | 658 |
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| container_title | Journal of financial economics |
| container_volume | 137 |
| creator | Fleckenstein, Matthias Longstaff, Francis A. |
| description | We find that Treasury floating rate notes (FRNs) trade at a significant premium relative to the prices of Treasury bills and notes. This premium is directly related to the near-constant nature of FRN prices and is correlated with measures reflecting investor demand for safe assets. Money market funds are often the primary investors in FRNs, and the FRN premium is related to flows into funds with fixed net asset values, but not to flows into funds with variable net asset values. These results provide strong evidence that the FRN premium represents a convenience yield for the mark-to-market stability feature of FRNs. |
| doi_str_mv | 10.1016/j.jfineco.2020.04.006 |
| format | Article |
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| ispartof | Journal of financial economics, 2020-09, Vol.137 (3), p.637-658 |
| issn | 0304-405X 1879-2774 |
| language | eng |
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| source | Elsevier ScienceDirect Journals |
| subjects | Asset pricing premia Assets Bonds Cash flow Convenience yield Demand Investors Mark-to-market stability Money market funds Money markets Prices Treasury floating rate notes |
| title | The US Treasury floating rate note puzzle: Is there a premium for mark-to-market stability? |
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