THE IMPACT OF U.S. MACROECONOMIC NEWS ANNOUNCEMENTS ON BOND PRICES: EVIDENCE FROM U.S. BOND MARKETS
Haataja, Jukka (2011)
Kuvaus
Opinnäytetyö kokotekstinä PDF-muodossa.
Tiivistelmä
This study analyzes how U.S. macroeconomic news affect daily U.S. government bond yields. More accurately the study tries to find out what is the impact of scheduled U.S. macroeconomic news announcements on bond prices around the announcement moment. To investigate the behaviour, this thesis focuses on observations of U.S. government 2-year note, 10-year note and 30-year bond indices during the period of 2005 to 2010. Moreover, yields are analyzed during the whole sample period focusing on bond price changes in the specific macroeconomic news announcement days to see the impact of the difference between speculation and reality.
The analysis focuses on 7 macroeconomic news announcements selected on the basis of previous studies in the field and the Bureau of Labor Statistics classifications of major economic indicators. These factors are Consumer Price Index (CPI), Producers Price Index (PPI), Consumer Confidence Index (CCI), the Import and Export Price Indices (USIEX), Institute of Supply Management Survey (ISM), Retail Sales and Employment Situation. These same indicators are used in many previous research papers and by reading those papers these are the ones with the largest effects on bond prices.
The impact created by the unexpected part of arrival information is regressed on the difference of daily logarithmic returns of three different maturity Treasuries, to examine the effect of economic news releases on bonds. Moreover this thesis tries to tract the information that is creating the sharpest daily bond price changes. This is made simply by putting the daily bond price movements in order from smallest to largest, and see what would have created this movement.
The empirical results show that U.S. macro announcements have statistically significant effect on Treasury yields. Moreover, the results contain proves that in general the positive surprise creates negative bond returns, but there are some exceptions.
The analysis focuses on 7 macroeconomic news announcements selected on the basis of previous studies in the field and the Bureau of Labor Statistics classifications of major economic indicators. These factors are Consumer Price Index (CPI), Producers Price Index (PPI), Consumer Confidence Index (CCI), the Import and Export Price Indices (USIEX), Institute of Supply Management Survey (ISM), Retail Sales and Employment Situation. These same indicators are used in many previous research papers and by reading those papers these are the ones with the largest effects on bond prices.
The impact created by the unexpected part of arrival information is regressed on the difference of daily logarithmic returns of three different maturity Treasuries, to examine the effect of economic news releases on bonds. Moreover this thesis tries to tract the information that is creating the sharpest daily bond price changes. This is made simply by putting the daily bond price movements in order from smallest to largest, and see what would have created this movement.
The empirical results show that U.S. macro announcements have statistically significant effect on Treasury yields. Moreover, the results contain proves that in general the positive surprise creates negative bond returns, but there are some exceptions.