Finance and Economics Discussion Series (FEDS)

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August 2014

Unspanned macroeconomic factors in the yield curve

Laura Coroneo, Domenico Giannone, and Michele Modugno

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.

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

PDF: Full Paper

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Last Update: June 26, 2020