Extraction of proxy relative sovereign bond yield curve factors

Hokuto Ishii

Applied Economics Letters, 2022, vol. 29, issue 20, 1927-1930

Abstract: This study analyses the relationship between sovereign yield factors and exchange rate changes. A new method is proposed to extract proxy relative yield factors from the yield curves of two countries. As previous studies showed (e.g. Chen and Tsang 2013; Wellmann and Trück 2018), the relative yield curve factors play an important role in explaining the variation in the foreign exchange rates. Especially, the proxy relative level and slope factors have explanatory power for exchange rate changes, especially for the JPY/USD pair.

Date: 2022
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DOI: 10.1080/13504851.2021.1966363

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