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The information in the joint term structures of bond yields

Andrew Meldrum (), Marek Raczko () and Peter Spencer ()
Additional contact information
Andrew Meldrum: Board of Govenors of the Federal Reserve System
Marek Raczko: Barclays Bank PLC

No 772, Bank of England working papers from Bank of England

Abstract: While standard no-arbitrage term structure models are estimated using nominal yields from a single country, a growing literature estimates joint models of yields in multiple countries or nominal and real yields from a single country. However, this paper argues that, in two of the most common applications joint modelling does not bring any material benefits in capturing the dynamics of bond yields. Joint models of US and German nominal yields do not offer economically significant advantages in fitting the cross section of yields or predicting future yields. We obtain similar results for joint models of US nominal and real yields.

Keywords: Affine term structure model; international interest rate co-movement; real interest rates (search for similar items in EconPapers)
JEL-codes: F30 G12 G15 (search for similar items in EconPapers)
Date: 2018-12-21
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