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The Impact of Macroeconomic News on Bond Yields: (In)Stabilities over Time and Relative Importance

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  • Liebermann, Joelle

    (Central Bank of Ireland)

Abstract

We study the daily response of T-Bond yields to the news in a large set of macroeconomic releases over the sample running from January 1997 to September 2010. The full-sample results show that the yields react systematically to a set of news consisting of the soft data, which have very short publication lags, and the most timely hard data, with the employment report being the most important release. Further looking at sub-samples over the pre-Great Recession period reveals that parameter instability in terms of absolute and relative size of yields response to news, as well as significance, is present. The often cited dominance to markets of the employment report has been evolving over time, as the size of the yields reaction to it was steadily increasing. Over the most recent crisis period, however, there has been an overall switch in the relative importance of soft and hard data compared to the pre-crisis period, with the later becoming more important even if less timely. Moreover, the scope of hard data to which markets react to has increased and is more balanced in terms of size of the response, hence less concentrated on the employment report.

Suggested Citation

  • Liebermann, Joelle, 2011. "The Impact of Macroeconomic News on Bond Yields: (In)Stabilities over Time and Relative Importance," Research Technical Papers 7/RT/11, Central Bank of Ireland.
  • Handle: RePEc:cbi:wpaper:7/rt/11
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    References listed on IDEAS

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    Cited by:

    1. Guglielmo Maria Caporale & Fabio Spagnolo & Nicola Spagnolo, 2014. "Macro News and Bond Yield Spreads in the Euro Area," CESifo Working Paper Series 5008, CESifo Group Munich.
    2. Sreejata Banerjee & Divya Sinha, 2015. "Effect of Macroeconomic News Releases on Bond Yields in India China and Japan," Working Papers 2015-125, Madras School of Economics,Chennai,India.

    More about this item

    Keywords

    News; Real-Time Data; Term Structure;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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