Template-type: ReDIF-Paper 1.0
Author-Name: Filippo Cavaleri
Author-Name-First: Filippo
Author-Name-Last: Cavaleri
Author-Name: Angelo Ranaldo
Author-Name-First: Angelo
Author-Name-Last: Ranaldo
Author-Person: pra161
Author-Name: Enzo Rossi
Author-Name-First: Enzo
Author-Name-Last: Rossi
Author-Person: pro820
Title: The demand for safe assets
Abstract: This paper examines how heterogeneity in investment horizons determines the demand for safe assets, bidding strategies in auctions, and post-auction price dynamics. We model a uniform-price double auction with resale where long-term investors hold assets to maturity, while dealer banks distribute the asset in secondary markets. Pure private (common) values emerge when only long-term investors (dealers) participate. Using unique data on Swiss Treasury bond auctions revealing bidders' identities, our empirical findings support key predictions: (1) substantial heterogeneity in demand schedules, with steeper demand curves for dealer banks; (2) dealer banks' demand becomes steeper with increased demand risk and bid dispersion; and (3) demand elasticity positively predicts post-auction returns.

Length: 62 pages
Creation-Date: 2025
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2025/working_paper_2025_03
File-Format: text/html
Number: 2025-03
Classification-JEL: D44, G12, D82, G14
Keywords: Auction, Asset demand, Safe asset, Private and common values, Government bonds
Handle: RePEc:snb:snbwpa:2025-03