A Note on Forecasting Treasury Returns with GDP

16 Pages Posted: 21 Nov 2015

Date Written: November 19, 2015


Cieslak and Povala (2011) discovered that conditioning levels of interest rates on trend inflation helps to forecast bond returns. This note explores that theme using other measures of trend including trend GDP growth. I find that a model free de-trending of rates by trend GDP performs as well or better out of sample as the Cieslak and Povala return predicting factor. This is a result predicted by the classic fisher hypothesis.

Keywords: Bond risk premia, bond returns, Cieslak and Povala, returns

Suggested Citation

Sabol, Steven, A Note on Forecasting Treasury Returns with GDP (November 19, 2015). Available at SSRN: https://ssrn.com/abstract=2687808 or http://dx.doi.org/10.2139/ssrn.2687808

Steven Sabol (Contact Author)

Capital Markets Data ( email )

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