Risk-free interest rates

Abstract

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 interest rates and implied convenience yields with maturities up to three years at a minutely frequency. Our estimated convenience yield on Treasuries equals about 40 basis points, is larger below three months maturity, and quadruples during the financial crisis. In high-frequency event studies, conventional and unconventional monetary stimulus reduces our rates more than the corresponding Treasury yields, thus broadly affecting rates even outside the narrow confines of the fixed-income market.