Modelling Sovereign Bond Yield Curves of the US, Japan and Germany
AbstractThe movement of sovereign yields is important for both investment and risk management. In this paper, we apply a method that was first developed by Diebold et al (2006b) to model the sovereign bond yield curves of the US, Japan and Germany. By including observable macroeconomic variables and the latent factors of the yield curve, we find evidence of strong interaction between the yield curve and macro variables in the US and Germany but not in Japan. We also estimate the dynamic conditional correlations of the latent factors to reveal cross-country correlations of the bond markets.
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Bibliographic InfoPaper provided by Hong Kong Monetary Authority in its series Working Papers with number 0709.
Length: 17 pages
Date of creation: Jun 2007
Date of revision:
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Yield curve; Term structure; Interest rate; Kalman filter;
Find related papers by JEL classification:
- G1 - Financial Economics - - General Financial Markets
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
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