Yield curve reaction to macroeconomic news in Europe: disentangling the US influence

Marie Brière () and Florian Ielpo ()

No 07-038.RS, Working Papers CEB from Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB)

Abstract: This paper analyses the response of the Euro yield curve to macroeconomic and monetary policy announcements. We present a new methodology for estimating the reaction of the Euro swap curve to economic news, in a data-rich environment. Given the sharp degree of interdependence between Euro rates and US rates, we propose to use the factors of the US yield curve to disentangle the daily variation in Euro rates stemming from US influence and the variation resulting from European news. We highlight the importance of taking the US yield curve influence into account and investigate the shape of the Euro term structure reaction to a range of news types. We find that the impact of economic announcements on the yield curve shows different patterns according to the news and we provide a hierarchy of the economic figures that have the strongest impact on the different maturities.

Keywords: announcements; news; swap rates; yield curve; interest rates; Euro area. (search for similar items in EconPapers)
JEL-codes: E43 E52 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Date: 2007-09
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http://www.solvay.edu/EN/Research/Bernheim/documents/wp07038.pdf First version, 2007 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:sol:wpaper:07-038

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