Description
Abstract: We document the effects of investor preferences for bonds with particular characteristics on their yields. Using a unique security-level dataset on institutional investors’ monthly holdings of Government of Canada bonds, we study the relationship between the net purchases of investors with different investment mandates and bond yield changes. We find considerable heterogeneity in the impact of net purchases and yield changes, depending both on the type of investor and on the duration of the bond. This provides support for the notion that different segments of the bond maturity spectrum are “inhabited” by particular types of investors and that their investment mandates partly determine the nature of the interaction between their purchases and yields.