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Michele Modugno (Federal Reserve)

15 October 2015 at 1:00 PM - 2:00 PM

Room Sala riunioni (livello docenti)


Title: "The Low Frequency Effects of Macroeconomic News on Government Bond Yields"

Abstract:

In this study, we analyze the reaction of the U.S. Treasury bond
market to innovations in macroeconomic fundamentals. We identify
these innovations based on macroeconomic news, which are defined as
differences between the actual releases and market expectations. We
find that that macroeconomic news explain about one-third of the low
frequency (quarterly) fluctuations in long-term bond yields. When we
focus on the high frequency (daily) movements, this decrease to one tenth.
This is because macroeconomic news have a persistent effect on
bond yields, whereas non-fundamental factors have substantial effects
on the day-to-day movements of bond yields, although their effects
are shorter lived.