NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

What Makes US Government Bonds Safe Assets?

Zhiguo He, Arvind Krishnamurthy, Konstantin Milbradt

NBER Working Paper No. 22017
Issued in February 2016
NBER Program(s):Asset Pricing, International Finance and Macroeconomics

US government bonds are widely considered to be the world’s safe store of value. US government bonds are a large fraction of safe asset portfolios, such as the porfolios of many central banks. The world demand for safe assets leads to low yields on US Treasury bonds. During periods of economic turmoil, such as the events of 2008, these yields fall even further. Moreover, despite the fact that US government debt has risen substantially relative to US GDP over the last decade, US government bond yields have not risen. What makes US government bonds “safe assets”? Our answer in short is that safe asset investors have nowhere else to go but invest in US government bonds.

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Document Object Identifier (DOI): 10.3386/w22017

Published: Zhiguo He & Arvind Krishnamurthy & Konstantin Milbradt, 2016. "What Makes US Government Bonds Safe Assets?," American Economic Review, vol 106(5), pages 519-523.

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