Macroeconomic announcements and their effects on bond market volatility

This paper examines the effects of macroeconomic news announcements on bond market volatility for the U.S., Germany and the U.K. Using an ARCH-type specification, volatility effects and their persistence is modeled for employment, PPI and target interest rate announcements. It is found that all types of announcements have significant effects on U.S. Treasury volatility, while this is only the case for target interest rate announcements in Europe. Furthermore, it is found that announcement day volatility sometimes persist, seemingly inconsistent with the semi-strong form of the Efficient Market Hypothesis. Moreover, it is shown that FOMC announcements are more important than ECB and BoE announcements for longer-term maturity bonds in Europe, although domestic announcements are found to be more important in the short end of the yield curve.