62 Pages Posted: 16 Mar 2011 Last revised: 10 Jun 2017
Date Written: March 9, 2017
We use high-frequency data to precisely estimate bond price reactions to macroeconomic announcements and the associated compensation for macro risks. We find evidence of a single factor summarizing the reaction of bond prices to different announcements. Prior to the financial crisis, the factor risk premium is substantial, significant, and mainly earned before announcement releases. After the crisis, the stock-bond covariance becomes negative and the pre-announcement factor risk premium becomes insignificant. Our empirical results are consistent with information leakages that take place ahead of announcement releases, and with the implications of a long-run risks model of bond risk premia.
Keywords: macroeconomic announcements, mimicking portfolios, economic risk premia
JEL Classification: G12
Suggested Citation: Suggested Citation
Balduzzi, Pierluigi and Moneta, Fabio, Economic Risk Premia in the Fixed Income Markets: The Intra-Day Evidence (March 9, 2017). AFA 2012 Chicago Meetings Paper; Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1786895 or http://dx.doi.org/10.2139/ssrn.1786895
By Wayne Ferson