NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Bond Market Clienteles, the Yield Curve, and the Optimal Maturity Structure of Government Debt

Stéphane Guibaud, Yves Nosbusch, Dimitri Vayanos

NBER Working Paper No. 18922
Issued in March 2013
NBER Program(s):   AP   IFM   PE

We propose a clientele-based model of the yield curve and optimal maturity structure of government debt. Clienteles are generations of agents at different lifecycle stages in an overlapping-generations economy. An optimal maturity structure exists in the absence of distortionary taxes and induces efficient intergenerational risksharing. If agents are more risk-averse than log, then an increase in the long-horizon clientele raises the price and optimal supply of long-term bonds—effects that we also confirm empirically in a panel of OECD countries. Moreover, under the optimal maturity structure, catering to clienteles is limited and long-term bonds earn negative expected excess returns.

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Published: Stéphane Guibaud & Yves Nosbusch & Dimitri Vayanos, 2013. "Bond Market Clienteles, the Yield Curve, and the Optimal Maturity Structure of Government Debt," Review of Financial Studies, Society for Financial Studies, vol. 26(8), pages 1914-1961.

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