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Yield curve momentum

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  • Markus Sihvonen

Abstract

I analyze time series momentum along the Treasury term structure. Yield curve momentum is primarily due to changes in the level factor of yields. Because yield changes are partly induced by changes in the federal funds rate, yield curve momentum is related to post-FOMC (Federal Open Market Committee) announcement drift. The momentum factor is unspanned by the information in the term structure today and is hence inconsistent with standard term structure, macrofinance, and behavioral models. I argue that the results are consistent with a model with unpriced longer term dependencies.

Suggested Citation

  • Markus Sihvonen, 2024. "Yield curve momentum," Review of Finance, European Finance Association, vol. 28(3), pages 805-830.
    • Handle: RePEc:oup:revfin:v:28:y:2024:i:3:p:805-830.
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    More about this item

    Keywords

    Bond risk premia; term structure models; time series momentum; spanning;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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