The information in the joint term structures of bond yields

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 21 December 2018

Staff Working Paper No. 772

By Andrew Meldrum, Marek Raczko and Peter Spencer

While standard no-arbitrage term structure models are estimated using nominal yields from a single country, a growing literature estimates joint models of yields in multiple countries or nominal and real yields from a single country. However, this paper argues that, in two of the most common applications joint modelling does not bring any material benefits in capturing the dynamics of bond yields. Joint models of US and German nominal yields do not offer economically significant advantages in fitting the cross section of yields or predicting future yields. We obtain similar results for joint models of US nominal and real yields.

PDFThe information in the joint term structures of bond yields

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