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Mr. Balazs Csonto and Mr. Camilo E Tovar Mora
Uphill capital flows constitute a key transmission channel through which reserve accumulation can distort the stability of the international monetary system. This paper examines and quantifies the importance of this transmission channel by examining how foreign official purchases of U.S. Treasuries influences the U.S. yield curve at different maturities. Our findings suggest that a percentage point increase in foreign official holdings relative to outstanding marketable securities reduces the term premium by 2.0–2.4 basis points at maturities of 2–3 years. These estimates are then used to gauge the role of a global policy in reducing excess reserve accumulation?e.g., a composite global reserve asset or through global liquidity facilities. Findings show that a policy that reduces the demand for Treasuries by $100 billion would increase yields by 1.5–1.8 basis points.
Mr. Rodrigo Cabral, Mr. Richard Munclinger, Mr. Luiz Alves, and Mr. Marco Rodriguez Waldo
This paper characterizes the term structure of Treasury bond yields for Brazil, and estimates a Nelson-Siegel Model to reproduce its stylized facts for the period 2004-2010. For this purpose, this paper uses a software developed by Fund staff. In addition, the paper estimates two versions of the Nelson-Siegel Model that incorporates macroeconomic variables with the aim of assessing the dynamic interactions between the yield curve and the macroeconomy.
Mr. Balazs Csonto and Mr. Camilo E Tovar Mora

Yield Dynamics and the Federal Funds Rate 5. Term Premia, Risk Perception, and UMP 6. Long-Term Disequilibrium and the Contribution of Foreign Official Holdings to Box 1. U.S. Treasuries and the Global Policy Debate Annexes 1. Announcements by the Federal Reserve 2. Theoretical Framework 3. Cointegration Tests

International Monetary Fund. European Dept.

10Y Bond Yield ΔInterest rate outlook −0.04 [0.159] ΔLog(VIX) 0.64*** [0.187] ΔPolitical risk rating 0.02 [0.051] ΔInflation Expectation 0.01 [0.008] ΔFiscal balance(% GDP) −0.06 [0.044] Error correction term (one lag) −0.13*** [0.046] Intercept −0.03 [0.026] No. of Obs. 122 R-Squared 0.195 Notes : Standard error in brackets. * p<0.10, ** p<0.05, ***p<0.01 Short-term dynamics: The most significant impact on short-term yield dynamics are from the changes of the

Pietro Cova, Massimiliano Pisani, Nicoletta Batini, and Mr. Alessandro Rebucci

DGE model yields dynamics that are partially consistent with those observed in the data. The simulations can explain a significant fraction of the overall deterioration in the U.S. trade balance since 1998, some of the surpluses in Japan and the euro area, and the persistent U.S. exchange rate swings observed in the data. The basic mechanisms at work in the model, however, result in an exchange rate that is too little volatile compared with the data. One important implication of the analysis is that, as past TFP accelerations seem persistent but ultimately

International Monetary Fund. European Dept.

hikes, it is possible that search for yield dynamics will continue to drive strong asset growth going forward. With assets under management already at €3½ trillion, efforts to modestly increase collections from the sector would be wholly consistent with “following the money.” Options would need to preserve Luxembourg’s appeal internationally, with due consideration for tax arrangements in major competing investment fund jurisdictions. Increase taxes on real estate and motor vehicles, where rates are currently set at relatively low levels . Strikingly, the last round

Mr. Rodrigo Cabral, Mr. Richard Munclinger, Mr. Luiz Alves, and Mr. Marco Rodriguez Waldo

, while Table 3 displays descriptive statistics for the spreads at different maturities. The last three columns in both Tables show sample autocorrelations at different displacements. Based on these results we can identify the following stylized facts, whose replication should be the test for any potential model of the Brazilian yield curve: The average yield curve is upward sloping and concave. The yield curve assumes a variety of shapes through time, including upward sloping, downward sloping, humped, and inverted humped. 29 Yield dynamics are persistent, while

International Monetary Fund

estimates. The average yield curve is upward sloping and concave. The yield curve assumes a variety of shapes through time, including upward sloping, downward sloping, humped, and inverted humped. 41 Yield dynamics are persistent, while spread dynamics are less persistent. 42 The short end of the yield curve is more volatile than the long end. 43 The level of the yield curve is highly persistent, but exhibits small variation relative to its mean. In fact the level is more persistent than any single yield. The slope is less persistent than any single yield but highly

International Monetary Fund
This paper discusses the estimation of models of the term structure of interest rates. After reviewing the term structure models, specifically the Nelson-Siegel Model and Affine Term- Structure Model, this paper estimates the terms structure of Treasury bond yields for the United States with pre-crisis data. This paper uses a software developed by Fund staff for this purpose. This software makes it possible to estimate the term structure using at least nine models, while opening up the possibility of generating simulated paths of the term structure.
International Monetary Fund

and figures. First, the average Czech yield curve is increasing and concave. Second, the persistence of yield dynamics is high. Third, the short end of the yield curve is more volatile than the long end of the yield curve. Forth, short rates are relatively more persistent than long yields. 19 We accompany the yield curve data with the following monthly macroeconomic variables from May 2000 to February 2010. Since we are using monthly data frequency, we cannot use GDP data as they are only available with quarterly frequency. Therefore, in order to capture the