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Macro Surprises And Short-Term Behaviour In Bond Futures

  • Eugene Durenard
  • David Veredas
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    This paper analyses how the macro news affect the future price of the ten year Treasure bond future (TY), one of the most important US bonds. We consider different fundamentals and we analyze the effect of their forecasting errors conditionally on their sign and the momentum of the business cycle. To obtain a smooth effect of the news arrival we consider a Polynomial Distributed Lag (PDL) model. We conclude that i)fundamentals affect TY for some hours, ii)their effect depends on the sign of the forecast error and iii) it depends on the business cycle. Finally the timeliness of the releases matters. Cet article discute de l'effet des nouvelles macroéconomiques sur le prix futur des bons du Trésor ayant échéance dans 10 ans, l une des classes d'obligations les plus importantes. On prendra en considération divers facteurs fondamentaux et on analysera l'effet de leurs erreurs de prédiction conditionnellement au signe et au momentum du cycle économique. Pour obenir un effet lisse sur l'arrivée des nouvelles, on prendra un modèle à retard polynomial distribué (PDL) On conclura que i) les facteurs fondamentaux affectent les rendements des obligations du Trésor pendant quelques heures, ii) leurs effets dépendent du signe de l'erreur de prédiction et iii)ils dépendent aussi du cycle économique. Finalement, le ``timing'' de l'arrivée de nouvelles macroéconomiques est important.

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    File URL: http://www.cirano.qc.ca/files/publications/2002s-03.pdf
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    Paper provided by CIRANO in its series CIRANO Working Papers with number 2002s-03.

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    Length: 44 pages
    Date of creation: 01 Jan 2002
    Date of revision:
    Handle: RePEc:cir:cirwor:2002s-03
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    1. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2002. "Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange," Working Papers 02-16, Duke University, Department of Economics.
    2. DeGennaro, Ramon P. & Shrieves, Ronald E., 1997. "Public information releases, private information arrival and volatility in the foreign exchange market," Journal of Empirical Finance, Elsevier, vol. 4(4), pages 295-315, December.
    3. Pierluigi Balduzzi & Edwin J. Elton & T. Clifton Green, 1996. "Economic News and the Yield Curve: Evidence From the U.S. Treasury Market," New York University, Leonard N. Stern School Finance Department Working Paper Seires 96-13, New York University, Leonard N. Stern School of Business-.
    4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
    5. Michael J. Fleming & Eli M. Remolona, 1997. "What moves the bond market?," Research Paper 9706, Federal Reserve Bank of New York.
    6. Engle, Robert F, 1998. "Macroeconomic Announcements and Volatility of Treasury Futures," University of California at San Diego, Economics Working Paper Series qt7rd4g3bk, Department of Economics, UC San Diego.
    7. Torben G. Andersen & Tim Bollerslev, 1998. "Deutsche Mark-Dollar Volatility: Intraday Activity Patterns, Macroeconomic Announcements, and Longer Run Dependencies," Journal of Finance, American Finance Association, vol. 53(1), pages 219-265, 02.
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