Do Geopolitical Shocks Move the Primary Market? Evidence from U.S. Treasury Auction Yields

초록

This study examines the impact of geopolitical risk (GPR) shocks on U.S. Treasury auction stop-out yields using data from 2008 to 2025. Unlike prior research focusing on secondary market yields, we analyse the primary market where borrowing costs are determined at issuance. Employing Local Projection (LP) and Smooth Local Projection (SLP), we find that GPR shocks significantly raise the stop-out yields, with SLP delivering smoother and more economically plausible impulse responses. These findings provide direct evidence that GPR shocks influence the price discovery process in the primary market and highlight their fiscal relevance for managing sovereign debt under geopolitical risk.

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