Term Structure Modeling with Supply Factors and the Federal Reserve's Large-Scale Asset Purchase Progarms
by Canlin Li and Min Wei
Division of Monetary Affairs, Federal Reserve Board of Governors
This paper estimates an arbitrage-free term structure
model with both observable yield factors and Treasury and
agency MBS supply factors, and uses it to evaluate the term
premium effects of the Federal Reserve’s large-scale asset purchase
programs. Our estimates show that the first and second
large-scale asset purchase programs and the maturity extension
program jointly reduced the ten-year Treasury yield by
about 100 basis points.
JEL Codes: G1, E4, C5.
(PDF, 38 pages 477 kb)
Discussion by Mark Loewenstein