This paper studies the market price of credit risk incorporated into one of the most important credit spreads in the financial markets: interest rate swap spreads. Our approach consists of jointly modeling the swap and Treasury term structures using a general five-factor affine credit framework...

We ask whether banks use interest rate swaps to hedge the interest rate risk of their assets, primarily loans and securities. To this end, we use regulatory data on individual swap positions for the largest 250 U.S. banks. We find that the average bank has a large notional amount of swaps-- $434...

While foreigners are prominent in the Treasury market and in theoretical and empirical work, little is known about the nature of their Treasury portfolios. We provide novel evidence on foreigners' U.S. Treasury portfolios based on data not yet used by researchers: the security-level Treasury...

It is widely believed that Treasuries trade at premium prices because of their safety and money-like properties. In reality, this is only true on a relative basis when compared to other bonds, but is often not true on an absolute basis. Many Treasuries have repeatedly traded at substantial...

A new model is proposed for representinq the term to maturity structure of interest rates at a point in time.The model produces humped, monotonic and S-shaped yield curves using four parameters. Conditional on a time decay parameter, estimates of the other three are obtained by least squares....

We investigate whether bonds span the volatility risk in the U.S. Treasury market, as predicted by most 'affine' term structure models. To this end, we construct powerful and model-free empirical measures of the quadratic yield variation for a cross-section of fixed-maturity zero-coupon bonds...

We examine the role of price discovery in the U.S. Treasury market through the empirical relationship between orderflow, liquidity, and the yield curve. We find that orderflow imbalances (excess buying or selling pressure) can account for as much as 26 percent of the day-to-day variation in...

We examine whether there is a flight-to-liquidity premium in Treasury bond prices by comparing them with prices of bonds issued by Refcorp, a U.S. Government agency, which are guaranteed by the Treasury. We find a large liquidity premium in Treasury bonds, which can be more than fifteen percent...

We analyze bidding data from uniform price auctions of U.S. Treasury bills and notes between July 2009-October 2013. Primary dealers consistently bid higher yields compared to direct and indirect bidders. We estimate a structural model of bidding that takes into account informational asymmetries...

We quantify the difference in the convenience yield of U.S. Treasuries and the bonds of near default-free sovereigns by measuring the gap between the FX swap-implied dollar yield paid by foreign governments and the U.S. Treasury dollar yield. We call this wedge the "U.S. Treasury Premium." We...