The safety associated with Treasuries means that it has a lower yield than comparable bonds. A simple way to measure this convenience yield is through the spread against AAA-rated bonds. The convenience yield or premium you are willing to pay during a crisis will rise, but what seems to be a trend is the decline in convenience yield over the last ten years. We are at the lowest convenience yield since the mid-1990s. The interesting point that has been noted by several researchers is that the convenience yield during the pandemic was much lower than the GFC or the tech bubble.
The question on the mind of many is whether Treasuries have lost their safe-haven status. Many are now saying that the significant increase in Treasury debt is softening the safe haven effect. It is unlikely that it is gone, but it seems to be muted. What is its substitute? It could be gold, but there is not enough of the real asset to make up for the Treasury demand. It is not likely to be Europe, so what is the new safe haven?
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