Working Papers

2019-28 | November 2019


The Safety Premium of Safe Assets


Safe assets usually trade at a premium thanks to their high credit quality and deep liquidity. To understand the role of credit quality for such premia, we focus on Swiss Confederation bonds, which are extremely safe, but not particularly liquid. We therefore refer to their premia as safety premia and quantify them using an arbitrage-free term structure model that accounts for time-varying premia in individual bond prices. The estimation results show that Swiss safety premia are large and exhibit long-lasting trends. Furthermore, regression analysis suggests that they shifted upwards in a persistent manner following the launch of the euro and have been depressed in recent years by the asset purchases of the European Central Bank.

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Article Citation

Christensen, Jens H. E, and Nikola Mirkov. 2019. "The Safety Premium of Safe Assets," Federal Reserve Bank of San Francisco Working Paper 2019-28. Available at