Recent asset pricing models of limits to arbitrage emphasize the role of funding conditions faced by financial intermediaries. In the US, the repo market is the key funding market. Then, the premium of on-the-run U.S. Treasury bonds should share a common component with risk premia in other...

The purpose of this paper is to explore the reasons underlying the variable and sometimes very large differentials between United States Treasury bill rates and private sector U.S. money market rates of comparable maturity.