This paper analyses the response of the Euro yield curve to macroeconomic and monetary policy announcements. We present a new methodology for estimating the reaction of the Euro swap curve to economic news, in a data-rich environment. Given the sharp degree of interdependence between Euro rates and US rates, we propose to use the factors of the US yield curve to disentangle the daily variation in Euro rates stemming from US influence and the variation resulting from European news. We highlight the importance of taking the US yield curve influence into account and investigate the shape of the Euro term structure reaction to a range of news types. We find that the impact of economic announcements on the yield curve shows different patterns according to the news and we provide a hierarchy of the economic figures that have the strongest impact on the different maturities.
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Paper provided by Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) in its series Working Papers CEB with number
07-038.RS.
Find related papers by JEL classification: E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
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