Information in Yield Spread Trades

39 Pages Posted: 14 Apr 2019

See all articles by Yang-Ho Park

Yang-Ho Park

Board of Governors of the Federal Reserve System

Date Written: 2019-04-12


Using positions data on bond futures, I document that speculators' spread trades contain private information about future economic activities and asset prices. Strong steepening trades are associated with negative payroll surprises in subsequent months and can predict asset markets' reaction to future payroll releases, suggesting that speculators hold superior information about future payrolls. Steepening trades can also predict the rise of stock prices within a few hours before subsequent FOMC announcements, implying that the pre-FOMC stock drift is driven by informed speculation. Overall, evidence highlights spread traders' superior information and its important role in explaining announcement returns and pre-announcement drifts.

Keywords: Informed trading, Term structure, Business cycle, Pre-FOMC, Macroeconomic announcements

JEL Classification: E32, E43, G12, G14

Suggested Citation

Park, Yang-Ho, Information in Yield Spread Trades (2019-04-12). FEDS Working Paper No. 2019-025. Available at SSRN: or

Yang-Ho Park (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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