Does the Maturity Mix of Government Borrowing Impact Municipal Bond Rates?

Research output: Contribution to journalReview article

1 Citation (Scopus)

Abstract

The possibility that government borrowing may crowd out private borrowing has been widely discussed in the popular press and extensively analyzed by researchers. The Clinton Administration's “Operation Twist,” resulting in increased reliance on short-term securities to fund the Federal deficit, highlights the impact of the maturity structure of Treasury debt issues on interest rates. This paper examines the relationship between changes in the maturity distribution of Treasury issues and Moody's twenty year AA municipal bond yield. Briefly, I find changes in the maturity structure of outstanding Treasury securities Granger-cause changes in the Moody's twenty-year AA municipal bond yield. The results suggest that changes in the maturity structure of Treasury borrowing will impact the interest expense of municipal debt issues and therefore the rate of return earned by holders of municipal securities.

Original languageEnglish (US)
Pages (from-to)3-26
Number of pages24
JournalStudies in Economics and Finance
Volume19
Issue number1-2
DOIs
StatePublished - Jan 1 1998
Externally publishedYes

Fingerprint

Maturity
Borrowing
Government
Municipal bonds
Bond yields
Debt
Expenses
Interest rates
Twist
Crowd-out
Rate of return
Treasury securities

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Does the Maturity Mix of Government Borrowing Impact Municipal Bond Rates? / Chopin, Marc C.

In: Studies in Economics and Finance, Vol. 19, No. 1-2, 01.01.1998, p. 3-26.

Research output: Contribution to journalReview article

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