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Title: What do bond investors learn from macroeconomic news Authors:  Guillaume Roussellet - McGill University (Canada) [presenting]
Jean-Sebastien Fontaine - Bank of Canada (Canada)
Bruno Feunou - Bank of Canada (Canada)
Abstract: Does the macroeconomic information in data releases shape bond yields in the long term? We offer evidence that the new information embedded in high-frequency bond price changes around the release of economic data explains around 40\% of yield fluctuations in the monthly horizons but that this share decreases to 20\% in the long run. From the perspective of a theoretical model in which investors use data releases to learn about the path of future short rates, our results suggest that investors' expectations are updated largely based on information revealed outside of the releases. Our results cast doubt on a transparent monetary policy response function linking macroeconomic surprises to the path of interest rates.