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The information in the joint term structures of bond yields

Author

Listed:
  • Meldrum, Andrew

    (Board of Govenors of the Federal Reserve System)

  • Raczko, Marek

    (Barclays Bank PLC)

  • Spencer, Peter

    (University of York)

Abstract

While standard no-arbitrage term structure models are estimated using nominal yields from a single country, a growing literature estimates joint models of yields in multiple countries or nominal and real yields from a single country. However, this paper argues that, in two of the most common applications joint modelling does not bring any material benefits in capturing the dynamics of bond yields. Joint models of US and German nominal yields do not offer economically significant advantages in fitting the cross section of yields or predicting future yields. We obtain similar results for joint models of US nominal and real yields.

Suggested Citation

  • Meldrum, Andrew & Raczko, Marek & Spencer, Peter, 2018. "The information in the joint term structures of bond yields," Bank of England working papers 772, Bank of England.
  • Handle: RePEc:boe:boeewp:0772
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Affine term structure model; international interest rate co-movement; real interest rates;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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