Discussion paper

DP13899 Risk-Free Interest Rates

We estimate risk-free interest rates unaffected by convenience yields on safe assets. We infer them from risky asset prices without relying on any specific model of risk. We obtain a term structure of convenience yields with maturities up to 2.5 years at a minutely frequency. The convenience yield on treasuries equals about 40 basis points, is larger below 3 months maturity, and quadruples during the financial crisis. In high-frequency event studies, conventional and unconventional monetary stimulus reduce convenience yields, particularly during the crisis. We further study convenience-yield-free CIP deviations, and we show significant bond return predictability related to convenience yields.


van Binsbergen, J, W Diamond and M Grotteria (2019), ‘DP13899 Risk-Free Interest Rates‘, CEPR Discussion Paper No. 13899. CEPR Press, Paris & London. https://cepr.org/publications/dp13899