Publication detail

The importance of non-macroeconomic factors for explaining yield curve movements

Author(s): Mgr. Ing. Adam Kučera ,
Type: Submissions
Year: 2018
Number: 0
Published in: Submitted into: The European Journal of Finance
Publishing place:
Keywords: interest rate, macro-finance model, Nelson-Siegel, yield curve
JEL codes:
Suggested Citation:
Grants: Examining the Impact of the Government Spending on the Term Structure of Interest Rates: A Macro-Finance Approach
Abstract: We use a narrative approach combined with Bayesian inference to identify shocks beyond daily movements in U.S. Treasury yields between 2013 and 2018. We show that a significant share of the movements can be attributed to non-macroeconomic shocks. Most importantly, the flight to or from quality unrelated to the U.S. business cycle explained approximately one-third of the movements. This finding questions the common practice in the macro-finance term structure modelling, when the models are usually extended only by macroeconomic variables. We further support our finding by demonstrating the improved forecasting performance of a simple model after including non- macroeconomic information. Additionally, we use our shock attribution to construct a counterfactual path of U.S. yields and demonstrate the what-if path of yields in the event that U.S. Treasuries would not be subject to safe-haven flights.




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