The effect of interest rate volatility on treasury yields

摘要: There is a substantial literature on the level and volatility of interest rates. However, there no agreement to date relationship between two, e.g., whether higher rate will result in or lower bond yields. Further, virtually research role maturity this relationship. It hypothesized that, because stochastic nature rates embedded option associated with government's ability time its borrowings, should be negative Treasury Moreover, stronger for longer-maturity bonds, everything else held constant. This hypothesis tested empirically, using yield data from US market. The main finding that does indeed have significant effect yields, significance greater 20-year bonds than 10-year as hypothesized. adds w...