Tests for jumps in yield spreads

Lars Winkelmann and Wenying Yao

No 2021/15, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: This paper develops high-frequency econometric methods to test for jumps in the spread of bond yields. We derive a coherent inference procedure that detects a jump in the yield spread only if at least one of the two underlying bonds displays a jump. We formalize the test as a sequential procedure in the context of an intersection union test in multiple testing and introduce a new bivariate jump test for pre-averaged intra-day returns. In an empirical application involving high-frequency data of U.S. government bonds, we contrast response patterns of term spreads and break-even in ation across monetary policy announcements, in ation, and employment news releases.

Keywords: High-frequency data; sequential testing; news announcements; term spread; break-even inflation (search for similar items in EconPapers)
JEL-codes: C12 C58 E43 E44 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ecm, nep-mac, nep-mst and nep-ore
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https://www.econstor.eu/bitstream/10419/246078/1/1776163168.pdf (application/pdf)

Related works:
Journal Article: Tests for Jumps in Yield Spreads (2024)
Working Paper: Tests for Jumps in Yield Spreads (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:202115

DOI: 10.17169/refubium-32211

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