The sensitivity of long-term rates to short-term rates represents a puzzle for standard macro-finance models. Post-FOMC announcement drift in Treasury markets after Federal Funds target changes contributes to the excess sensitivity of long rates. A model in which some investors slowly adjust...

Nominal yields can be expressed as the sum of an expectation, term premium, and convexity component, and in turn of their real and inflation counterparts. We extract these terms from the yield curve of the U.S., Euro Area, U.K., and Japan using a term structure model that explicitly captures the...

We incorporate a latent stochastic volatility factor and macroeconomic expectations in an affine model for the term structure of nominal and real rates. We estimate the model over 1999-2016 on U.S. data for nominal and TIPS yields, the realized and implied volatility of T-bonds and survey...