NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Risk-Free Interest Rates

Jules H. van Binsbergen, William F. Diamond, Marco Grotteria

NBER Working Paper No. 26138
Issued in August 2019
NBER Program(s):Asset Pricing Program, The Monetary Economics Program

We estimate risk-free interest rates unaffected by convenience yields on safe assets. We infer them from risky asset prices without relying on any specific model of risk. We obtain a term structure of convenience yields with maturities up to 2.5 years at a minutely frequency. The convenience yield on treasuries equals about 40 basis points, is larger below 3 months maturity, and quadruples during the financial crisis. In high-frequency event studies, conventional and unconventional monetary stimulus reduce convenience yields, particularly during the crisis. We further study convenience-yield-free CIP deviations, and we show significant bond return predictability related to convenience yields.

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Document Object Identifier (DOI): 10.3386/w26138

 
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