The Maturity Ambiguity: A Study on the Liquidity Premia in US Treasury Securities

Sammanfattning

This thesis explores the impact of strict mutual fund maturity constraints on the liquidity premium of US Treasuries by examining the yield spreads between assets of varying maturities and liquidity. We find that there is different demand dynamics depending on maturity of T-bills. In addition, the existence of an on-the-run phenomenon within the T- bill market is assessed, with no clear evidence that a consistent liquidity premium between these highly liquid assets exist. The drivers behind the liquidity premium between T-bills and deposits is studied with the opportunity cost of money being a dominant driver over time, that in recent years have had the T-bill supply alongside it as a contributor to the liquidity premium of near-money assets.