we label Convergence Gap (CG), contains information that is valuable for bond predictability. Adding CG in forecasting … regressions of bond excess returns significantly raises the R-squared, and restores countercyclical variation in bond risk premia … the path of rates, our factor has predictive ability for real bond excess returns. The importance of the gap remains …

bank's own interest rate expectations. From a theoretical point of view, the latter should yield the highest forecast …

We find that 30-minute changes in bond yields around scheduled Federal Open Market Committee (FOMC) announcements are … predicts a contractionary policy news shock (positive change in bond yields), a negative GDP growth revision predicts an … expansionary policy news shock (negative change in bond yields). Failing to account for this predictability biases the estimates of …