RWP 25-10, September 2025
Using high frequency data, we find that spillovers to the U.S. yield curve from the European Central Bank increased following the global financial crisis and strengthened when the United States normalized policy out of sync with other advanced economies. These spillovers were amplified by a contemporaneous waning in the “convenience” of Treasuries. This amplification provides evidence for a portfolio balance channel of transmission that is time-varying based on the non-pecuniary characteristics of Treasuries. We rationalize these facts using a two-country model of preferred habitat investors, where time-varying price-elasticity of demand for Treasuries gives rise to time-varying spillovers.
JEL classifications: E44, E52, F42, G12
Article Citation
Karlye Dilts Stedman and Andrew Hanson. “Unconventional Monetary Policy Spillovers and the (In)convenience of Treasuries.” Federal Reserve Bank of Kansas City, Research Working Paper no. 25-10, September. Available at External Linkhttps://doi.org/10.18651/RWP2025-10
The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.