RATE-AMPLIFYING DEMAND AND THE EXCESS SENSITIVITY OF LONG-TERM RATES

• 成果类型: Article
• 署名作者: Hanson, Samuel G.; Lucca, David O.; Wright, Jonathan H.
• 署名单位: Harvard University; Federal Reserve System - USA; Federal Reserve Bank - New York; Johns Hopkins University
• 刊物名称: QUARTERLY JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0033-5533
• DOI: 10.1093/qje/qjab011
• 发表日期: 2021
• 页码: 1719-1781
• 关键词: ASSET PRICE DYNAMICS; MUTUAL FUND FLOWS; monetary-policy; structural-change; risk-taking; yield curve; heteroskedasticity; expectations; INFORMATION; volatility

摘要

Long-term nominal interest rates are surprisingly sensitive to high-frequency (daily or monthly) movements in short-term rates. Since 2000, this high-frequency sensitivity has grown even stronger in U.S. data. By contrast, the association between low-frequency changes (at 6- or 12-month horizons) in long- and short-term rates, which was also strong before 2000, has weakened substantially. This puzzling post-2000 pattern arises because increases in short rates temporarily raise the term premium component of long-term yields, leading long rates to temporarily overreact to changes in short rates. The frequency-dependent excess sensitivity of long-term rates that we observe in recent years is best understood using a model in which (i) declines in short rates trigger rate-amplifying shifts in investor demand for long-term bonds, and (ii) the arbitrage response to these demand shifts is both limited and slow. We study, theoretically and empirically, how such rate-amplifying demand can be traced to mortgage-refinancing activity, investors who extrapolate recent changes in short rates, and investors who reach for yield when short rates fall. We discuss the implications of our findings for the validity of event study methodologies and the transmission of monetary policy.