Abstract
If current financial market trends persist, US Treasury securities are bound to account for an increasingly smaller share of the fixed-income market in the USA. This paper examines the extent to which investors' portfolio allocation decisions are likely to be affected by the relative reduction in the stock of federal government debt. The analysis suggests only small effects for most investors, especially, as is effectively the case for many institutional investors, when a no-short-sales constraint is in place. Under such circumstances, highly conservative investors — whose portfolios have risk-return characteristics akin to money market instruments — and very aggressive investors — who hold mostly equities — stand to be the least affected by the removal of Treasuries from the pool of investable assets. The analysis abstracts from indirect beneficial effects on investors from a Treasury debt pay-off, such as the potential for greater productivity growth (and faster wealth accumulation) as more resources are freed up for investment in the private sector.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
