The Interest Rate Effects of Government Debt Maturity: Solving the Bond Conundrum
Year: 2025
Type: report
Abstract: Using an empirical model, this paper finds that shortening the average maturity of US Treasury debt held outside the Federal Reserve by one year reduces the five-year forward 10-year yield by between 130 and 150 basis points. Based on a pre-crisis period, these estimates suggest portfolio balance effects are unlikely to reflect only post-crisis market conditions. These findings also offer a partial explanation for the Greenspan conundrum: the fact that long-term interest rates in the mid-2000s rose less than expected after a rise in the Fed fund rate may have been due, to some extent, to the concomitant shortening of government debt maturity.
Source: Apollo (University of Cambridge)
DOI: 10.17863/cam.118371
Authors: Chadha, J. S., Turner, P., Zampolli, F.
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W6944258515
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