The term structure of announcement effects

Michael Fleming and Eli Remolona

No 76, Staff Reports from Federal Reserve Bank of New York

Abstract: We analyze high-frequency responses of U.S. Treasury yields across the maturity spectrum to macroeconomic announcements. We find that surprises in the announcements evoke the sharpest reactions from the intermediate maturities, thus forming striking hump-shaped curves of announcement effects. We then fit an affine-yield model to the yield changes using the announcement surprises as GMM instruments. The model estimates imply that the announcements elicit larger shocks to an expected future target interest rate than to the current short-term interest rate and that different types of announcements generate different expectations about this target rate, how rapidly it will be approached, and how long it will be maintained.

Keywords: Treasury bills; Interest rates; Business forecasting (search for similar items in EconPapers)
Date: 1999
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Working Paper: The term structure of announcement effects (1999)
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