Spread position as a leading economic indicator

Yang-Ho Park

Journal of Financial Markets, 2022, vol. 59, issue PA

Abstract: Yield spreads are closely linked to economic activity. Using positions data on bond futures, I document that speculators’ steepening positions are associated with higher recession probabilities and lower payroll growths in subsequent months. I attribute the predictive power to speculators’ superior payroll expectations because their spread positions are aligned with subsequent payroll surprises. Steepening positions are also likely to be followed by lower short-term yields and steeper yield curves, suggesting that the positions are associated with an expectation of low economic activities. Overall, speculators’ spread positions can be useful as a leading economic indicator as they contain information about future economic activity.

Keywords: Business cycle; Yield curve; Treasury future; Macroeconomic announcement; Informed trading (search for similar items in EconPapers)
JEL-codes: E32 E43 G14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1386418121000586
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: https://EconPapers.repec.org/RePEc:eee:finmar:v:59:y:2022:i:pa:s1386418121000586

DOI: 10.1016/j.finmar.2021.100681

Access Statistics for this article

Journal of Financial Markets is currently edited by B. Lehmann, D. Seppi and A. Subrahmanyam

More articles in Journal of Financial Markets from Elsevier
Bibliographic data for series maintained by Catherine Liu ().