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The crucial role of the five-year Treasury in the US yield curve

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  • Chen, Yu-Lun

Abstract

This paper analyzes the connectedness and spillover transmission mechanism in the U.S. Treasury yields with different maturities than previous studies which focused on the spread between short- and long-term rates. We find that 5-year Treasury yields play the role of the transmitter to other yields, conveying their liquidity and center location in yield curve advantages. Most importantly, the information transmitter role of 5-year Treasury yields remains unchanged under unconventional monetary policies even though these policies decrease the total connectedness of Treasury yields. The transmitter role of the 5-year Treasury has also manifested in the Treasury market flash event and in Treasury futures and ETFs.

Suggested Citation

  • Chen, Yu-Lun, 2023. "The crucial role of the five-year Treasury in the US yield curve," International Review of Financial Analysis, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finana:v:90:y:2023:i:c:s1057521923003447
    DOI: 10.1016/j.irfa.2023.102828
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    More about this item

    Keywords

    Treasury yield; Connectedness; Treasury market flash;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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