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Further Evidence on the Impact of Economic News on Interest Rates

  • Dominique Guégan,Florian Ielpo


    (Centre d'Economie de la Sorbonne, Paris)

We investigate the shape of the term structure reaction of the US swap rates to announcements using several linear and non-linear time series models. We document the non-linearity of the market reaction to macroeconomic news. First, we find that the introduction of non linear models leads to the finding of a significant number of macroeconomic figures that actually produce an effect over the yield curve. Second, we noticed at least four types of patterns in the term structure reaction of interest rates across maturities, including the humpshaped one that is generally considered. Third, we propose a first interpretation and classification of these different shapes. Fourth we find that the existence of outliers in interest rates leads to an underestimation of the reaction of interest rates to announcements, explaining the different results obtained between high-frequency and daily datasets.

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Article provided by SKEMA Business School in its journal Frontiers in Finance and Economics.

Volume (Year): 6 (2009)
Issue (Month): 2 (October)
Pages: 1 - 45

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Handle: RePEc:ffe:journl:v:6:y:2009:i:2:p:1-45
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  1. Michael J. Fleming & Eli M. Remolona, 1999. "The term structure of announcement effects," Staff Reports 76, Federal Reserve Bank of New York.
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  10. Antulio N. Bomfim, 2003. "Monetary policy and the yield curve," Finance and Economics Discussion Series 2003-15, Board of Governors of the Federal Reserve System (U.S.).
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