The high-frequency impact of news on long-term yields and forward rates: Is it real?

Meredith J. Beechey and Jonathan H. Wright

Journal of Monetary Economics, 2009, vol. 56, issue 4, pages 535-544

Abstract: Macroeconomic news announcements move yields and forward rates on nominal and index-linked bonds and inflation compensation. This paper estimates the reactions using high-frequency data on nominal and index-linked bond yields, allowing the effects of news announcements on real rates and inflation compensation to be parsed far more precisely than is possible using daily data. Long-term nominal yields and forward rates are very sensitive to macroeconomic news announcements. Inflation compensation is sensitive to announcements about price indices and monetary policy. However, for news announcements about real economic activity, such as nonfarm payrolls, the vast majority of the sensitivity is concentrated in real rates. Accordingly, most of the sizeable impact of news about real economic activity on the nominal term structure of interest rates represents changes in expected future real short-term interest rates and/or real risk premia rather than changes in expected future inflation and/or inflation risk premia. Such sensitivity of real rates to macroeconomics news is hard to rationalize within the framework of existing macroeconomic models.

Keywords: Intradaily; data; News; announcements; Inflation; compensation; Real; interest; rates (search for similar items in EconPapers)
Date: 2009

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6VBW ... 18f117320ea3b14a697d
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:moneco:v:56:y:2009:i:4:p:535-544

Access Statistics for this article

Journal of Monetary Economics is edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Series data maintained by Heidi Boesdal ().