RT Journal Article
SR Electronic
T1 Predicting the Direction of Interest Rate Movements
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 87
OP 95
DO 10.3905/jfi.2002.319314
VO 11
IS 4
A1 Nicolas Papageorgiou
A1 Frank S. Skinner
YR 2002
UL https://pm-research.com/content/11/4/87.abstract
AB This research develops a simple probit model for predicting the direction of long-term interest rates. One variation uses the slope of the term structure, and another uses the forward rate as a predictor variable. Out-of-sample tests on Federal Reserve data indicate that for a one-month forecast horizon, the model correctly predicts the direction of 5-, 7-, 10-, and 30-year yields with more than 60% success. The success rate is nearly as good when we use data obtained from yield curve estimates. While these results are not good enough to be the sole determinant in bond investment strategies, the model can provide useful information.