Journal Article
Central Bank Bond Purchases and the Price of Safety
Mirkov, Nikola; Zhang, Xin; Christensen, Jens H. E. (2026-06-22)
Central banks purchase bonds and other securities with their own reserves. In doing so, they expand the supply of safe assets in the economy, which should lower the premium investors are willing to pay for safety. Analysis confirms that bond purchases by the European Central Bank in 2015–2021 lowered safety premiums for investors, partially offsetting declines in bond yields as much as 30 basis points. The results suggest that such transactions essentially reduce a central bank’s effectiveness in using asset purchases to lower interest rates in safe bond markets.
FRBSF Economic Letter , Volume 2026 , Issue 16 , Pages 5

Journal Article
Pricing Inflation Swaps in the Japanese Bond Market
Shrestha, Mizla; Spiegel, Mark M.; Christensen, Jens H. E. (2026-10-07)
Japanese government bond markets present a puzzling pattern. Unlike U.S. markets, where bond liquidity and other premiums have been shown to drive a wedge between prices of nominal U.S. Treasury securities and those of matching portfolios comprised of inflation-indexed bonds and derivative contracts, analysis shows no such wedge for similar asset combinations in Japanese markets.
FRBSF Economic Letter , Volume 2026 , Issue 29 , Pages 6

Journal Article
Assessing supervisory scenarios for interest rate risk
Lopez, Jose A.; Christensen, Jens H. E. (2015)
A new proposal by the Basel Committee on Banking Supervision for setting the amount of capital banks must hold against potential losses from interest rate risk uses only a few, very stylized scenarios. Analysis shows the proposed scenarios are extremely unlikely to occur. While they may be appropriate for setting bank capital guidelines, they are much less relevant for everyday risk management. Instead, using a modeling framework with a plausible range of interest rate scenarios would be more relevant to help banks manage their interest rate risk.
FRBSF Economic Letter

Journal Article
Do All New Treasuries Trade at a Premium?
Shultz, Patrick; Lopez, Jose A.; Christensen, Jens H. E. (2017)
In the Treasury market, the most recently issued security typically trades at a higher price than more seasoned but otherwise comparable securities. The difference is known as the ?on-the-run? premium. This phenomenon opens the question of whether a similar premium exists for all Treasury bonds. Examining yield spreads between pairs of inflation-protected securities, known as TIPS, that have identical maturities but different issue dates suggests that this is not the case: There is no on-the-run premium in the TIPS market at this time.
FRBSF Economic Letter

Journal Article
Measuring Interest Rate Risk in the Very Long Term
Lopez, Jose A.; Mussche, Paul; Christensen, Jens H. E. (2017)
Insurance companies write policies to cover potential risks far into the future. Because the life of these contracts can extend well beyond the 30-year maturities for the longest U.S. Treasuries, it?s difficult to measure the interest rate risk involved. A new study describes how the long-term interest rates required to evaluate such long-lived liabilities can be extrapolated from shorter-maturity bond yields using a standard yield curve model. These extrapolations are a useful tool since they have very small errors relative to the yield curve variation typically considered for risk ...
FRBSF Economic Letter

Journal Article
Inflation expectations and the risk of deflation
Christensen, Jens H. E. (2009)
Predicting the course of inflation is one of the most important challenges facing monetary policymakers. Useful aids to such prediction are the measures of expected future inflation obtained from prices in government bond markets. An examination of recent inflation-indexed and non-indexed U.S. Treasury bond yields suggests that financial market participants believe that the probability of prolonged deflation has become fairly small.
FRBSF Economic Letter

Journal Article
Do Fed TIPS purchases affect market liquidity?
Gillan, James M.; Christensen, Jens H. E. (2012)
The second round of Federal Reserve large-scale asset purchases, from November 2010 to June 2011, included regular purchases of Treasury inflation-protected securities, or TIPS. An analysis of liquidity premiums indicates that the functioning of the TIPS market and the related inflation swap market improved both on the days the Fed purchased TIPS and over the course of the LSAP program. Thus, TIPS purchases had liquidity benefits beyond the effect they may have had in reducing Treasury yields.
FRBSF Economic Letter

Journal Article
TIPS and the risk of deflation
Christensen, Jens H. E. (2010)
The low level of inflation and the sluggish pace of economic recovery have raised concerns about sustained deflation?an inflation rate below zero with a general fall in prices. However, the relative prices of inflation-indexed and non-indexed Treasury bonds, which historically have proven to be good measures of inflation expectations, suggest that financial market participants consider the probability of deflation to be low.
FRBSF Economic Letter

Journal Article
New Evidence for a Lower New Normal in Interest Rates
Rudebusch, Glenn D.; Christensen, Jens H. E. (2017)
Interest rates during the current economic recovery have been unusually low. Some have argued that yields have been pushed down by declines in longer-run expectations of the normal inflation-adjusted short-term interest rate?that is, by a drop in the so-called equilibrium or natural rate of interest. New evidence from financial markets shows that a decline in this rate has indeed contributed about 2 percentage points to the general downward trend in yields over the past two decades.
FRBSF Economic Letter

Journal Article
Treasury bond yields and long-run inflation expectations
Christensen, Jens H. E. (2008)
This Economic Letter uses data on nominal and real Treasury yields to study the behavior of market-implied expected inflation since the beginning of 2007.
FRBSF Economic Letter