tag:blogger.com,1999:blog-5713178645208582139.post2255525707073123603..comments2024-03-17T03:26:42.785-05:00Comments on Macro Musings Blog: Why We Need More Private Safe Assets: Risk Premiums, the Triffin Dilemma, and Cyclical Changes David Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-5713178645208582139.post-65332634141202432802013-02-02T12:43:43.133-06:002013-02-02T12:43:43.133-06:00I don't think you can compare pre and during Q...I don't think you can compare pre and during QE "risk" premiums involving treasuries. QE is selectively lowering the yield on treasuries, not on BAA corporate bonds or equities. According to Bernanke ( http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm ), the effect is about 80-120bps at ten years - about the same as your excess risk premium on Baa corporates. RebelEconomisthttps://www.blogger.com/profile/13241098878248190971noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-36360787162936049112013-01-28T19:49:07.107-06:002013-01-28T19:49:07.107-06:00Yes, it makes sense.
But I'm looking at US tr...Yes, it makes sense.<br /><br />But I'm looking at <a href="http://online.wsj.com/mdc/public/page/2_3020-treasury.html" rel="nofollow">US treasury yields</a>. The 4.125% bond maturing on 5/15/2015 is priced at 108.62. But taking out my handy dandy <a href="http://www.smartmoney.com/calculator/bonds/bonds-calculator--bonds--bond-funds-1309988621833/" rel="nofollow">bond calculator</a>, it can JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-82223243666703872042013-01-28T10:23:38.059-06:002013-01-28T10:23:38.059-06:00Dan, that sounds intriguing could you explain it a...Dan, that sounds intriguing could you explain it a bit more?David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-82816830761997746962013-01-28T10:23:00.666-06:002013-01-28T10:23:00.666-06:00Anonymous, if the risk premium was lowered that is...Anonymous, if the risk premium was lowered that is exactly what would happen. David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-54793125088007668002013-01-28T10:19:31.522-06:002013-01-28T10:19:31.522-06:00Great question. I agree that if treasury prices ad...Great question. I agree that if treasury prices adjusted enough it would take of the safe asset shortage. But since we are living near the ZLB that can't happen. Interest rates would need to go below zero, but they won't since investors could earn at least 0% holding money. Thus, treasuries can't increase enough in value to clear the market. <br /><br />Also, since this clearing is David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-57386874836899351772013-01-26T20:48:44.280-06:002013-01-26T20:48:44.280-06:00Dan Kervick hits the ball out of the stadium. The ...Dan Kervick hits the ball out of the stadium. The problem is indeed too much safety - we need to be encouraging entrepreneurship and risk-taking, not providing featherbedding for the 1%. Our GDP has been stagnating for a decade due to this misplaced strategy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-24043424553904991972013-01-26T20:28:52.376-06:002013-01-26T20:28:52.376-06:00From Gofx. Per my comment on the last thread, hed...From Gofx. Per my comment on the last thread, hedging etc. can "make" assets safer. Thus a private creation of more "safe" assets can occur. There is a market price for such insurance. No asset can be completely safe. You can have counterparty risk on a hedge/derivative, but you can also have counterparty risk in terms of a Sovereign and associated default or political Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-48044891400365605132013-01-26T11:46:03.845-06:002013-01-26T11:46:03.845-06:00Isn't there a good argument to be made that th...Isn't there a good argument to be made that there are <i>too many</i> safe assets?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-17985176215162150312013-01-25T17:40:08.525-06:002013-01-25T17:40:08.525-06:00Why do we *need* more safe assets? Why don't w...Why do we *need* more safe assets? Why don't we just let the existing ones rise in value, thereby providing safety? <br /><br />If we wanted to express our desire for safety by buying fire extinguishers, then I'd agree that we need to produce more safe assets. After all, only some sort of increase in the supply of extinguishers will be able to meet that demand.<br /><br />But things are JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.com