Previous macro-finance term structure models (MTSMs) imply that macroeconomic state variables are spanned by (i.e., perfectly correlated with) model-implied bond yields. However, this theoretical implication appears inconsistent with regressions showing that much macroeconomic variation is...

We develop a portfolio balance model to analyze the impact of euro area quantitative easing (QE) on asset yields. Our model features two countries each populated by two agents representing their respective banking and mututal fund sectors. Agents, which differ in their preferences for assets,...

We develop an agent-based model (ABM) of a financial market with multiple assets belonging either to the fixed income or equity asset classes. The aim is to reproduce the main stylized facts of fixed income markets with regards to the emerging dynamics of the yield curves. Our ABM is rooted in...

Using a unique data set of individual professional forecasts, we document disagreement about the future path of monetary policy, particularly at longer horizons. The stark differences in short rate forecasts imply strong disagreement about the risk-return trade-off of longer-term bonds....

Asymmetric information between the central bank and bond markets creates an inference problem that affects the behaviour of long interest rates. This paper employs a simple macroeconomic model with a time-varying infation target to illustrate the implications of asymmetry for the sensitivity of...