What Moves Bond Prices?

Fleming, Michael J.; Remolona, Eli M.

doi:10.3905/jpm.1999.319756

Cited by 149 publications

(155 citation statements)

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“…The 5-minute frequency is robust to microstructure noise and offers sufficiently high frequency information to properly evaluate the impact of specific events. Moreover, this frequency is consistent with previous seminal contributions such as [5] and [13].…”

supporting

confidence: 80%

“…As far as government bond auctions are concerned, we refer to [5] where the impact of US treasury auctions on returns is assessed. [5] compute the "surprise" effect as the difference between 40 the yield in the when-issued market with the actual ex-post yield without relevant findings.…”

mentioning

confidence: 99%

“…[5] compute the "surprise" effect as the difference between 40 the yield in the when-issued market with the actual ex-post yield without relevant findings.…”

mentioning

confidence: 99%

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Macroannouncements, bond auctions and rating actions in the European government bond spreads

Boffelli

Urga

2015

Journal of International Money and Finance

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This paper investigates the impact of macroannouncements, government bond auctions and rating actions on the 10-year government bond spreads for Belgium, France, Italy, the Netherlands, Spain with respect to Germany. Using a unique tick-by-tick dataset over 1/02/2009-05/31/2012, we identify the impact of the three drivers via jump and cojump detection procedures. Disentangling the pre-from the post-announcement effects, real economy and forward looking news releases from US and Euro area, country specific Spanish and German macroannouncements, and auctions hold in distressed countries such Italy and Spain have a statistically and economically significant effect.No role is played by rating actions.Keywords: Jumps, Cojumps,Government Bond Spreads, Macroannouncements, Government Bond Auctions, Rating Actions.J.E.L. Classification Numbers: C58, C12, H63, G24.Europe is under stress and integration among European countries seems more fragile than ever.Starting from the subprime crisis in 2007, markets are more aware of the differences between European countries, and this sentiment is reflected, amongst others, in increasing differentials of government bond yields. In 2008 and 2009, government bond spreads became sizable but it was in 5 2010 and 2011 that spreads substantially increase, reaching levels even higher than those experienced in the pre-Euro era. It was just after the famous Mario Draghi's "whatever it takes" in July 2012 that a more normal situation on government bond markets was restored. The European sovereign debt $ We wish to thank participants in the 12th Oxmetrics User Conference (Cass, 3-4 September 2012), in particular Siem Koopman, Sebastien Laurent, and Bill Lyons for useful suggestions. We thank Michael J. Flemming and Jan Novotny for having provided very useful comments on a previous version of the paper. The usual disclaimer applies. Special thanks to Morningstar, in particular to Richard Barden, for having made available the rich data set used in this paper. Simona Boffelli acknowledges financial support from the Centre for Econometric Analysis of Cass Business School.* Centre for Econometric Analysis, Faculty of Finance, Cass Business School, City University London, 106 Bunhill Row, London, EC1Y 8TZ, UK and Bergamo University, Italy. G.Urga@city.ac.uk, Tel: +44 (0)20 7040 8698, Fax: +44 (0)20 7040 8881. Preprint submitted to Journal of International Money and FinanceDecember 22, 2014 crisis involving, although at different extents, all the peripheral countries have questioned the much celebrated markets' self-regulatory power as well as the ability of policy makers and regulators to 10 adopt stability measures and stimulate economic growth. Thus, understanding which factors drive sovereign risk is particularly timely also for the macroeconomic consequences of the comovements associated to these factors. For instance, higher spreads deteriorate borrowing capabilities and market confidence which simultaneously impact on consumption and investment. The way to ameliorate the effects of th...

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Macroannouncements, bond auctions and rating actions in the European government bond spreads

Boffelli

Urga

2015

Journal of International Money and Finance

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“…Only few happen at random times, such as the outbreak of the Gulf war which coincides with one of the 10 largest yield movements in the Johannes sample. More evidence on seasonalities around macroeconomic news releases is documented in Jones et al (1996), Fleming and Remolona (1997), Balduzzi et al (2001), and Li and Engle (2000).…”

Section: Higher-order Moments (Jumps and Regimes)mentioning

confidence: 99%

“…12.7, which suggests that we are in the high-persistence low-volatility regime most of the time, with the exception of the oil price shock and the monetary policy experiment. Fleming and Remolona (1997), Furfine (2001), andJohannes (2004) go back to see whether the largest yield-movements over a given time period coincide with certain events. Fleming and Remolona (1999) and Furfine (2001) use 5-minute price changes in the 5-year Treasury note, whereas Johannes (2004) uses daily data on the 3-month T-Bill rate.…”

Section: Higher-order Moments (Jumps and Regimes)mentioning

confidence: 99%

Affine Term Structure Models

Piazzesi

2010

Handbook of Financial Econometrics: Tools and Techniques

270

154

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Forward Rates, Monetary Policy and the Economic Cycle

Ielpo

2015

Journal of Forecasting

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The short end of the yield curve incorporates essential information to forecast central banks' decisions, but in a biased manner. This article proposes a new method to forecast the Fed and the European Central Bank's decision rate by correcting the swap rates for their cyclical economic premium, using an affine term structure model. The corrected yields offer a higher out‐of‐sample forecasting power than the yields themselves. They also deliver forecasts that are either comparable or better than those obtained with a factor‐augmented vector autoregressive model, underlining the fact that yields are likely to contain at least as much information regarding monetary policy as a dataset composed of economic data series. Copyright © 2015 John Wiley & Sons, Ltd.

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What Moves Bond Prices?

Cited by 149 publications

References 8 publications

Macroannouncements, bond auctions and rating actions in the European government bond spreads

Macroannouncements, bond auctions and rating actions in the European government bond spreads

Affine Term Structure Models

Forward Rates, Monetary Policy and the Economic Cycle

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