The Decreasing Convenience Yield and the Impact of Quantitative Tightening

Understanding the Changing Appeal of Government Bonds

Government bonds have long attracted investors, not just for their returns but also for unique advantages like high liquidity and their status as reliable collateral. These features contribute to what is known as the "convenience yield"—the portion of interest investors are willing to sacrifice for the ease and security of holding these assets.

Recently, however, convenience yields have not only diminished but have even dipped below zero in several leading economies. This article explores how government bond convenience yields have shifted in the wake of quantitative tightening policies.