The crucial role of the five-year Treasury in the US yield curve

Yu-Lun Chen

International Review of Financial Analysis, 2023, vol. 90, issue C

Abstract: This paper analyzes the connectedness and spillover transmission mechanism in the U.S. Treasury yields with different maturities than previous studies which focused on the spread between short- and long-term rates. We find that 5-year Treasury yields play the role of the transmitter to other yields, conveying their liquidity and center location in yield curve advantages. Most importantly, the information transmitter role of 5-year Treasury yields remains unchanged under unconventional monetary policies even though these policies decrease the total connectedness of Treasury yields. The transmitter role of the 5-year Treasury has also manifested in the Treasury market flash event and in Treasury futures and ETFs.

Keywords: Treasury yield; Connectedness; Treasury market flash (search for similar items in EconPapers)
JEL-codes: E5 G12 G14 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:90:y:2023:i:c:s1057521923003447

DOI: 10.1016/j.irfa.2023.102828

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