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Extracting Information from Financial Market Instruments


  • Richard Finlay

    (Reserve Bank of Australia)

  • David Olivan

    (Reserve Bank of Australia)


Financial market prices contain information about market expectations for economic variables, such as inflation or the cash rate, that are of interest to policymakers. This article describes four financial market instruments that are particularly useful for this, and documents how market expectations and other useful information can be derived from them. In particular, it describes how overnight indexed swap rates and government bond yields can be used to estimate a zero-coupon yield curve and infer market expectations for risk-free interest rates, and how inflation swap rates and inflation-indexed government bond yields can be used to infer market expectations for the inflation rate.

Suggested Citation

  • Richard Finlay & David Olivan, 2012. "Extracting Information from Financial Market Instruments," RBA Bulletin, Reserve Bank of Australia, pages 45-54, March.
  • Handle: RePEc:rba:rbabul:mar2012-06

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    References listed on IDEAS

    1. Spencer, Peter & Liu, Zhuoshi, 2010. "An open-economy macro-finance model of international interdependence: The OECD, US and the UK," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 667-680, March.
    2. Bolder, David & Streliski, David, 1999. "Yield Curve Modelling at the Bank of Canada," Technical Reports 84, Bank of Canada.
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    Cited by:

    1. Tahlee Stone, 2016. "The Sensitivity of Personal Income to GDP Growth," RBA Bulletin, Reserve Bank of Australia, pages 1-9, December.
    2. Ryan Fox & Peter Tulip, 2014. "Is Housing Overvalued?," RBA Research Discussion Papers rdp2014-06, Reserve Bank of Australia.
    3. Bobby Lien & Andrew Zurawski, 2012. "Liquidity in the Australian Treasury Bond Futures Market," RBA Bulletin, Reserve Bank of Australia, pages 49-58, June.
    4. Angus Moore, 2016. "Measures of Inflation Expectations in Australia," RBA Bulletin, Reserve Bank of Australia, pages 23-31, December.


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