Identification of significant risk factors for the term structure of interest rates
This model of the term structure of interest rates
with a time-varying quantity of bond risk however does not generate enough variability in nominal bond risk premia (or expected nominal bond excess returns) to match the variability uncovered by predictive regressions of nominal bond excess returns on lagged nominal yield spreads and forward rates.
For the entire sample period, there are strong liquidity effects for the entire term structure of interest rates
with the short end having a slightly higher effect.
Shocks to the net supply of, or demand for, bonds of one maturity do not affect other yields, nor the shape of the term structure of interest rates
Brennan and Schwartz (1979) developed a straddle model for term structure of interest rates
under the assumption that all the term structure can be expressed at any time in terms of the outcomes of instruments of short and long terms.
The term structure of interest rates
can be described in terms of the spot (or zero-coupon) rate, the discount rate and the forward rate.
The first section of this article reviews economic theories of the term structure of interest rates
and identifies the effects of supply shifts on bond yields.
Financial factors, macroeconomic information and the expectations theory of the term structure of interest rates
Mankiw and Miron (1986) argue that the apparent failure of the expectation theory of the term structure of interest rates
can be attributed to the effect of the monetary policy.
The paper stresses the "scientific" contributions of rules, including their insight into fluctuations of housing construction and exchange rates, as well as into the term structure of interest rates
Because the Fed operates with a target for the interest rate on overnight lending in the market for federal funds, it is natural for us to want to know more about how monetary policy affects the term structure of interest rates
and how expectations about monetary policy are revealed in market pricing.
These figures are based on the assumption that long-term interest rates, which are observed in the gilt-edged market, reflect expectations of future short-term interest rates, the traditional expectations hypothesis of the term structure of interest rates