Risk-taking channels and capital inflows into the US treasuries

•Dynamic interactions among capital inflows, asset prices, and leverage are explored.•How inflows to the US Treasuries affect risk-taking of financial intermediaries.•Inflows into the US Treasuries induce higher asset prices and leverage.•An amplification mechanism between asset prices and leverage is triggered by inflows.

This letter explores dynamic interactions among capital inflows, asset prices, and leverage. A VAR model provides evidence that expansionary shocks to capital inflows into the US Treasuries lead to higher leverage by inducing appreciation in relative asset prices.