Working Paper

Unspanned macroeconomic factors in the yield curve

Abstract: In this paper, we extract common factors from a cross-section of U.S. macro-variables and Treasury zero-coupon yields. We find that two macroeconomic factors have an important predictive content for government bond yields and excess returns. These factors are not spanned by the cross-section of yields and are well proxied by economic growth and real interest rates.

Keywords: Yield curve; government bonds; factor models; forecasting;

JEL Classification: C33; C53; E43; E44; G12;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2014-07-30

Number: 2014-57

Pages: 49 pages