Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249595 
Year of Publication: 
2021
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 15/2021
Publisher: 
Bank of Finland, Helsinki
Abstract: 
I analyze time series momentum along the Treasury term structure. Past bond returns predict future returns both due to autocorrelation in bond risk premia and because unexpected bond return shocks increase the premium. Yield curve momentum is primarily due to autocorrelation in yield changes rather than autocorrelation in bond carry and can largely be captured using a single bond return or yield change factor. Because yield changes are partly induced by changes in the federal funds rate, yield curve momentum is related to post-FOMC announcement drift. The momentum factor is unspanned by the information in the term structure today and is hence inconsistent with standard term structure, macrofinance and behavioral models. I argue that the results are consistent with a model with unpriced longer term dependencies.
Subjects: 
Bond risk premia
time series momentum
term structure models
post-FOMC announcement drift
JEL: 
G12
E43
E47
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-392-8
Document Type: 
Working Paper

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