Title

The increasing default risk of US Treasury securities due to the financial crisis

Authors

Authors

S. Nippani;S. D. Smith

Comments

Authors: contact us about adding a copy of your work at STARS@ucf.edu

Abbreviated Journal Title

J. Bank Financ.

Keywords

Financial crises; Treasury securities; Bond default risk; Risk-free; interest rate; US debt limit; US deficit; Yield spread; UNITED-STATES BANKRUPT; MARKET; Business, Finance; Economics

Abstract

This paper paper examines the impact of the current financial crisis on long-term US Treasury yields by testing the impact of a series of events from December 2007 to March 2009 on the spread between 10-year USD LIBOR swap and 10-year US Treasury (constant maturity) rates to measure risk associated with Treasuries. Controlling for the liquidity of the two markets, the default risk of the swap, and the net foreign purchases of Treasury securities, we find that 13 of the tested 20 events have significantly negative coefficients. We conclude that the lower spread is consistent with greater default risk for US Treasury securities. (C) 2010 Elsevier B.V. All rights reserved.

Journal Title

Journal of Banking & Finance

Volume

34

Issue/Number

10

Publication Date

1-1-2010

Document Type

Article

Language

English

First Page

2472

Last Page

2480

WOS Identifier

WOS:000281020900014

ISSN

0378-4266

Share

COinS