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Modelling sovereign bond yield curves of the US, Japan and Germany

Author

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  • Chi-Sang Tam

    (Market Research Division, Research Department, Hong Kong Monetary Authority, Hong Kong)

  • Ip-Wing Yu

    (Market Research Division, Research Department, Hong Kong Monetary Authority, Hong Kong)

Abstract

The movement of sovereign yields is important for both investment and risk management. This paper applies a method that was first developed by Diebold et al. (2006) to model the sovereign bond yield curves of the US, Japan and Germany. By including observable macroeconomic variables as well as the latent factors of the yield curve, we find evidence of a 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 the cross-country correlations of the bond markets. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Chi-Sang Tam & Ip-Wing Yu, 2008. "Modelling sovereign bond yield curves of the US, Japan and Germany," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 82-91.
    • Handle: RePEc:ijf:ijfiec:v:13:y:2008:i:1:p:82-91
    DOI: 10.1002/ijfe.353
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    References listed on IDEAS

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    Cited by:

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    2. Yasir Riaz & Choudhry T. Shehzad & Zaghum Umar, 2021. "The sovereign yield curve and credit ratings in GIIPS," International Review of Finance, International Review of Finance Ltd., vol. 21(3), pages 895-916, September.
    3. ZHU Xiaoneng & Shahidur RAHMAN, 2009. "Global Yield Curves and Sovereign Bond Market Integration," Economic Growth Centre Working Paper Series 0902, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    4. Vahidin Jeleskovic & Anastasios Demertzidis, 2018. "Comparing different methods for the estimation of interbank intraday yield curves," MAGKS Papers on Economics 201839, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Qifa Xu & Junqing Zuo & Cuixia Jiang & Yaoyao He, 2021. "A large constrained time‐varying portfolio selection model with DCC‐MIDAS: Evidence from Chinese stock market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3417-3435, July.
    6. Alexey Akimov & Simon Stevenson & Maxim Zagonov, 2015. "Public Real Estate and the Term Structure of Interest Rates: A Cross-Country Study," The Journal of Real Estate Finance and Economics, Springer, vol. 51(4), pages 503-540, November.

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