This chapter discusses what the asset-pricing literature concludes about the forecastability of interest rates. It outlines forecasting methodologies implied by this literature, including dynamic, no-arbitrage term structure models and their macro-finance extensions. It also reviews the...

We develop a conditional factor model for the term structure of treasury bonds, which unifies non parametric curve estimation with cross-sectional asset pricing. Our factors correspond to the optimal non-parametric basis functions spanning the discount curve. They are investable portfolios...