Title

The Increasing Default Risk Of Us Treasury Securities Due To The Financial Crisis

Keywords

Bond default risk; Financial crises; Risk-free interest rate; Treasury securities; US debt limit; US deficit; Yield spread

Abstract

This 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. © 2010 Elsevier B.V.

Publication Date

10-1-2010

Publication Title

Journal of Banking and Finance

Volume

34

Issue

10

Number of Pages

2472-2480

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/j.jbankfin.2010.04.005

Socpus ID

77955983431 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/77955983431

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