The Triffin Margin: Who Absorbs Treasury Supply, and What It Costs

The Triffin margin: who absorbs Treasury supply, and what it costs. Does the yield cost of absorbing a dollar of new Treasury supply depend on whether the marginal buyer is a reserve manager or a private investor? The paper writes a two-buyer version of the Farhi-Maggiori hegemon model: an official sector whose demand is set by reserve needs and barely responds to price, and a private sector that pays a convenience premium but is price-elastic. The comparative static is that the yield response to a supply shock rises as the official share of the stock falls, and the model is calibrated so the implied elasticities are passport numbers. The test interacts the Phillot (2025) high-frequency Treasury supply shocks, identified from futures moves in the minutes around auction-size announcements, with the foreign-official share from TIC and the Financial Accounts, 2000 to 2025. Because the official share has fallen from roughly two fifths of the market after 2008 to under a fifth, a plain time interaction is an exogenous shock times a trend, so the identification comes from the cross-section of maturity buckets within each announcement window, where the official share differs sharply and the time trend is differenced out, and the interaction is shown to beat a time-varying coefficient before any magnitude is quoted. Bi, Phillot and Zubairy (2025) show the response is larger when debt is growing fast; Jansen, Li and Schmid (2024) and the granular-instrumental-variable work assign yield impact to the official sector and find its demand the least elastic; a Kansas City Fed note (Dilts Stedman 2025) asserts that composition now matters. The increment is the model-implied interaction with an exogenous supply shock, which none of them estimates. A referee would write: the paper turns the slogan that the Treasury market has become more price-sensitive into an estimated, model-implied interaction, and the magnitude is the one a debt manager and a CBO interest-cost projection would plug in.

This is a fresh, full-length NBER build of this pitch (a first build, delivered 2026-10-01 as paper-triffin-margin, came out short: a one-bucket model with one proposition, no related-literature section, four figures, and two referee rounds saying the quantity-based daily-window test could not carry the question, answered by an honest null). Build the full paper to the venue floors: a two-bucket or multi-asset model with at least three propositions, a calibration and a quantitative exercise; a standalone related-literature section; two distinct estimation approaches for the headline interaction, with the full robustness battery drawn as well as tabled. The Phillot high-frequency shock series sits behind an openICPSR login the engine cannot pass, so construct a supply-shock series with a demonstrable first stage from data the house serves (announcement-window yield or futures moves, auction sizes versus Treasury guidance, or the refunding-statement path), compare it with the quantity surprise, and let the loop-back rule govern what the referees find. Reuse nothing from the first build except what the Library already holds.