This paper develops high-frequency econometric methods to test for jumps in the spread of bond yields. We derive a coherent inference procedure that detects a jump in the yield spread only if at least one of the two underlying bonds displays a jump....
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ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
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This paper develops high-frequency econometric methods to test for jumps in the spread of bond yields. We derive a coherent inference procedure that detects a jump in the yield spread only if at least one of the two underlying bonds displays a jump. We formalize the test as a sequential procedure in the context of an intersection union test in multiple testing and introduce a new bivariate jump test for pre-averaged intra-day returns. In an empirical application involving high-frequency data of U.S. government bonds, we contrast response patterns of term spreads and break-even in ation across monetary policy announcements, in ation, and employment news releases.
