Working Papers

2019-28 | February 2021


The Safety Premium of Safe Assets


Safe assets usually trade at a premium due 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, our regression analysis suggests that they shifted upwards persistently following the launch of the euro but 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