Tuesday, January 26, 2021

Yield Curve Slope Correlations — Brian Romanchuk

When looking at bond yields, one should keep in mind that the entire yield curve is a mathematical object. A venerable research approach is to attempt to use time series econometrics to either isolated tenors or slopes. This approach leads to misleading degrees of freedom in bond yield dynamics.

In this article, I will do the simplest step towards modelling the yield curve -- looking at the relationships between selected slopes. We see that slopes move together, which pins down how disjointed various parts of the curve can get. Digging further would require access to a fitted curve....
Bond Economics
Yield Curve Slope Correlations
Brian Romanchuk

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