Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171952
Authors: 
Fontaine, Jean-Sébastien
Year of Publication: 
2016
Series/Report no.: 
Bank of Canada Staff Working Paper 2016-61
Abstract: 
The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main driver of uncertainty is a "path" factor signaling information about future policy actions, which is filtered from federal funds futures data. The uncertainty is highest when it signals a loosening cycle. The uncertainty raises the risk premium in a loosening cycle, reducing the transmission of target changes to longer maturities. Our results trace the information content of federal funds futures to hedging demand.
Subjects: 
Asset pricing
Financial markets
Interest rates
JEL: 
E43
E44
E47
G12
G13
Document Type: 
Working Paper

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