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Unspanned Macroeconomic Factors in the Yield Curve |
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| Authors: | Laura Coroneo Domenico Giannone Michele Modugno |
| Affiliation: | 1. Department of Economics and Related Studies, University of York, Heslington, York YO10 5DD, United Kingdom (laura.coroneo@york.ac.uk);2. Research and Statistics Group, Federal Reserve Bank of New York, New York, NY 10045-0001 (domenico.giannone@ny.frb.org);3. Board of Governors of the Federal Reserve System, Washington, DC (Michele.Modugno@frb.gov) |
| Abstract: | In this article, 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. |
| Keywords: | Dynamic factor models Forecasting Government bonds Yield curve |