Coronavirus: bond market and growth expectations

Abstract

The pandemic triggered exceptional monetary policy interventions by the Federal Reserve, which in March 2020 cut the target rate. This thesis makes progress in understanding the impact of COVID-19 on the treasuries market by examining the behaviour of the determinants of the term structure of bond yields in the United States. For this, we use the Nelson-Siegel (1987) approach to the term structure of interest rates. Findings suggest that the treasury yields closely follow the cut in target rate. Hence, revealing as a good economic predictor.

A pandemia desencadeou intervenções excecionais de política monetária por parte do Banco Central Norte Americano, que em março de 2020 cortou a "Target Rate". Esta tese tem como objetivo examinar o impacto do COVID-19 no mercado das "Treasuries", analisando o comportamento dos determinantes da estrutura das Treasuries nos Estados Unidos. Para isso, vai ser utilizada a abordagem de Nelson-Siegel (1987). Os resultados sugerem que as "Treasuries Yields" acompanham o corte na "Target Rate". Portanto, revelam ser um bom preditor económico.