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The Low Frequency Effect of Macroeconomic News on Colombian Government Bond Yields

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  • Andrey Duván Rincón-Torres
  • Luisa María de la Hortúa-Pulido
  • Kimberly Rojas-Silva
  • Juan Manuel Julio-Román

Abstract

We study the effect of macroeconomic announcements surprises on Colombian treasury bond spot rates in the medium term. For this, we employ a two-step regression approach proposed by Altavilla, Giannone and Modugno (2017), which takes into account the high frequency response to these surprises while filtering out the noise in the estimation of its medium to long term effect. We found that the share of variation of one day Colombian treasury bond spot rates changes explained by these surprises lies below 10%. Moreover, Colombian macroeconomic announcement surprises other than the nominal exchange rate depreciation do not seem to significantly affect spot rate changes, although important ones have big (but not significant) effect. Furthermore, the explanatory power of macroeconomic news surprises increases substantially at longer horizons, i.e. monthly and quarterly changes, reaching 34% for the latter. These results arise from the fact that spot rate changes show a delayed effect to shocks. This is mostly due to the features of the shocks contained in the error and the persistence of macroeconomic news surprises effect’s. Our results are robust to the appetite for risk of international investors measure employed in the model. **** RESUMEN: Estudiamos el efecto de mediano a largo plazo de las sorpresas en los anuncios de cifras macroeconómicas sobre las tasas cero cupón de los títulos denominados en pesos de la Tesorería Nacional, TES. Empleamos regresión en dos etapas propuesta por Altavilla, Giannone and Modugno (2017), la cual tiene en cuenta las respuestas de alta frecuencia a las sorpresas, que filtra el ruido en la estimación de los efectos en el mediano plazo. Encontramos que el porcentaje de las variaciones de los cambios de alta frecuencia de las tasas spot explicadas por las sorpresas es inferior al 10%. Adicionalmente, las sorpresas macroeconómicas colombianas, excepto la depreciación nominal, no afectan significativamente los cambios de las tasas cero cupón, aunque algunas sorpresas importantes tienen un efecto grande (pero no significativo). Además, el poder explicativo de las sorpresas se incrementa substancialmente para horizontes más largos, i.e. cambios mensuales y trimestrales, alcanzando un 34% para el último. Estos resultados reflejan el hecho de que las tasas spot responden con retraso a los choques, lo cual está asociado a las características de los choques en el error y la persistencia del efecto de las sorpresas. Nuestros resultados son robustos a la medida del apetito por riesgo de los inversionistas internacionales empleada en el modelo.

Suggested Citation

  • Andrey Duván Rincón-Torres & Luisa María de la Hortúa-Pulido & Kimberly Rojas-Silva & Juan Manuel Julio-Román, 2023. "The Low Frequency Effect of Macroeconomic News on Colombian Government Bond Yields," Borradores de Economia 1263, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:1263
    DOI: 10.32468/be.1263
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    References listed on IDEAS

    as
    1. Faust, Jon & Rogers, John H. & Wang, Shing-Yi B. & Wright, Jonathan H., 2007. "The high-frequency response of exchange rates and interest rates to macroeconomic announcements," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1051-1068, May.
    2. Cochrane, John H. & Sbordone, Argia M., 1988. "Multivariate estimates of the permanent components of GNP and stock prices," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 255-296.
    3. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-489, October.
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    More about this item

    Keywords

    Macroeconomic announcements; News; Low frequency analysis; Treasury bonds spot rates; Anuncios de cifras macroeconómicas; Noticias; Análisis de baja frecuencia; Tasa de los bonos de tesorería;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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