Quantile-on-Quantile Connectedness Measures: Evidence From the US Treasury Yield Curve

Abstract

This study introduces a novel quantile-on-quantile connectedness approach to explore the spillovers between the 2-year US Treasury yield (US2Y) and the yield curve spread between the 10-year and 2-year US Treasury yield (US2Y10Y) from 13 July 1998 to 11 July 2023. The empirical results show that the average total connectedness between reversely related quantiles is significantly higher than directly related quantiles. Additionally, the average quantile-based total connectedness is heterogeneous over time and economic events dependent. These findings emphasize the importance of analyzing reversely related quantile connectedness in conjunction with directly related quantile spillovers.

Keywords: US yield curve; dynamic connectedness; quantile-on-quantile.

JEL Classification: C50; F65; G15.