What Moves Yields in Australia?
In this paper, we measure how the fixed-interest market in Australia assesses and responds to new economic information. We use high-frequency data, precise announcement times and market-based forecasts to measure the reaction of bill and bond yields to news. The period covered is from January 1994 to September 1997. We find that announcements about US economic news have had a large impact on yields in Australia – especially bond yields. Of the domestic announcements, the market responds to: monetary policy announcements, the CPI, the labour force and AWOTE, as well as a range of other economic statistics. We also find that the fixed-interest market seems to distinguish between the information contained in different economic announcements and that traders systematically respond to the size and direction of any unanticipated component of these announcements. The results suggest that the market perceives that information on prices, employment and wages is more important in the Reserve Bank’s decisions about monetary policy than are other indicators of economic activity. Taken in sum, the results also suggest some consistency of response to news in the fixed-interest market in Australia.
|Date of creation:||Jul 1998|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.rba.gov.au/
More information through EDIRC
|Order Information:||Web: http://www.rba.gov.au/forms/rdp-order-form/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gordon de Brouwer & Luci Ellis, 1998. "Forward-looking Behaviour and Credibility: Some Evidence and Implications for Policy," RBA Research Discussion Papers rdp9803, Reserve Bank of Australia.
- Edison, Hali J, 1997.
"The Reaction of Exchange Rates and Interest Rates to News Releases,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 2(2), pages 87-100, April.
- Hali J. Edison, 1996. "The reaction of exchange rates and interest rates to news releases," International Finance Discussion Papers 570, Board of Governors of the Federal Reserve System (U.S.).
- Urich, Thomas & Wachtel, Paul, 1981. "Market Response to the Weekly Money Supply Announcements in the 1970s," Journal of Finance, American Finance Association, vol. 36(5), pages 1063-72, December.
- Tro Kortian & James O’Regan, 1996. "Australian Financial Market Volatility: An Exploration of Cross-country and Cross-market Linkages," RBA Research Discussion Papers rdp9609, Reserve Bank of Australia.
- Hardouvelis, Gikas A., 1988. "Economic news, exchange rates and interest rates," Journal of International Money and Finance, Elsevier, vol. 7(1), pages 23-35, March.
When requesting a correction, please mention this item's handle: RePEc:rba:rbardp:rdp9808. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paula Drew)
If references are entirely missing, you can add them using this form.