Working Paper: CEPR ID: DP12086
Authors: Marcin Kacperczyk; Christophe Perignon; Guillaume Vuillemey
Abstract: Do claims on the private sector serve the role of safe assets? We answer this question using high-frequency panel data on prices and quantities of certificates of deposit (CD) and commercial paper (CP) issued in Europe. We show that only very short-term private securities benefit from a premium for safety. We then use several sources of variation to show that the issuance of short-term CDs strongly responds to measures of safety demand. The private production of safe assets is stronger for issuers with high credit worthiness, and breaks down during episodes of market stress. We conclude that even very short-term private assets are sensitive to changes in the information environment and should not be treated as equally safe at all times.
Keywords: safe assets; collateral; short-term debt; treasuries
JEL Codes: E44; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unexpected shocks to the demand for safe assets (E44) | dynamics of private asset issuance (G19) |
| variations in bid-to-cover ratio from T-bill auctions (D44) | excess demand for public assets (H82) |
| public asset supply (H82) | private asset issuance (G24) |
| safety premium on private securities (G24) | demand for short-term private assets (G19) |
| high safety premiums in T-bills (E43) | issuance of private CDs (G24) |
| market stress (G10) | production of private safe assets (D14) |
| credit quality of issuers (G33) | relationship between public and private asset issuance (H74) |