Low Frequency Effects of Macroeconomic News on Government Bond Yields

Carlo Altavilla, Domenico Giannone and Michele Modugno

No 2014-52, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This study analyzes the reaction of the U.S. Treasury bond market to innovations in macroeconomic fundamentals. We identify these innovations with macroeconomic news, defined as differences between the actual releases and their market expectations. We show that macroeconomic news explain about one-third of the low frequency (quarterly) fluctuations of long-term bond yields. When focusing on the high frequency (daily) movements this share decreases to one-tenth. This result is due to the fact that macro news have a persistent effect on the yield curve. Non-fundamental factors, instead, substantially influence the day-to-day movements of bond yields but their effects are shorter-living and mean-reverting.

Keywords: macroeconomic announcements; News; Treasury bond yield (search for similar items in EconPapers)
JEL-codes: E43 E44 E47 G14 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-06-23
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (18)

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http://www.federalreserve.gov/pubs/feds/2014/201452/201452pap.pdf Full text (application/pdf)

Related works:
Journal Article: Low frequency effects of macroeconomic news on government bond yields (2017)
Working Paper: Low Frequency Effects of Macroeconomic News on Government Bond Yields (2014)
Working Paper: Low Frequency Effects of Macroeconomic News on Government Bond Yields (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2014-52

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