We assess the effect of the QE2 program on the TIPS liquidity premium using a latent factor approach and a counterfactual exercise. In the context of a state-space model for nominal and TIPS yields, we identify the TIPS liquidity premium as the common component in TIPS yields that is unspanned...

We show that two macroeconomic factors have an important predictive content for governmentbond yields and excess returns. These factors are not spanned by the cross-section of yields andare well proxied by economic growth and real interest rates.

In this paper, we extract common factors from a cross-section of U.S. macro-variables and Treasury zero-coupon yields. We find that two macroeconomic factors have an important predictive content for government bond yields and excess returns. These factors are not spanned by the cross-section of...