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Overnight indexed swap-implied interest rate expectations

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  • Lloyd, Simon P.

Abstract

Overnight indexed swap (OIS) rates are regularly used to measure interest rate expectations. But how suitable are they? What tenors can we rely on? Assessing their performance in the US, UK, Eurozone and Japan, I find they provide broadly reliable measures of rate expectations out to around the 2-year tenor. Beyond these horizons, they contain persistent premia that complicate their use.

Suggested Citation

  • Lloyd, Simon P., 2021. "Overnight indexed swap-implied interest rate expectations," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319310761
    DOI: 10.1016/j.frl.2020.101430
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    References listed on IDEAS

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    1. Raiko Shareef, 2013. "Developments in New Zealand’s overnight indexed swaps market," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 76, pages 25-33, March.
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    4. Refet S Gürkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
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    Cited by:

    1. Gregory de Walque & Thomas Lejeune & Ansgar Rannenberg, 2023. "Empirical DSGE model evaluation with interest rate expectations measures and preferences over safe assets," Working Paper Research 433, National Bank of Belgium.
    2. Gnewuch, Matthias, 2022. "Spillover effects of sovereign debt-based quantitative easing in the euro area," European Economic Review, Elsevier, vol. 145(C).
    3. Matthieu Bellon & Matthias Gnewuch, 2024. "Dangerous liaisons? Debt supply and convenience yield spillovers in the euro area," Working Papers 63, European Stability Mechanism, revised 06 Nov 2024.
    4. Tim Munday & James Brookes, 2021. "Mark my words: the transmission of central bank communication to the general public via the print media," Bank of England working papers 944, Bank of England.
    5. Realdon, Marco, 2024. "The efficiency of the Estr overnight index swap market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).

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    More about this item

    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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