The high-frequencyimpactofnewsonlong-termyieldsandforward rates:Isitreal?$

Macroeconomicnewsannouncementsmoveyieldsandforwardratesonnominaland index-linkedbondsandinflationcompensation.Thispaperestimatesthereactions using high-frequencydataonnominalandindex-linkedbondyields,allowingthe effectsofnewsannouncementsonrealratesandinflationcompensationtobeparsedfar more preciselythanispossibleusingdailydata.Long-termnominalyieldsandforward ratesareverysensitivetomacroeconomicnewsannouncements.Inflationcompensa- tion issensitivetoannouncementsaboutpriceindicesandmonetarypolicy.However, for newsannouncementsaboutrealeconomicactivity,suchasnonfarmpayrolls,the vastmajorityofthesensitivityisconcentratedinrealrates.Accordingly,mostofthe sizeable impactofnewsaboutrealeconomicactivityonthenominaltermstructureof interestratesrepresentschangesinexpectedfuturerealshort-terminterestratesand/or real riskpremiaratherthanchangesinexpectedfutureinflationand/orinflationrisk premia. Suchsensitivityofrealratestomacroeconomicsnewsishardtorationalize withintheframeworkofexistingmacroeconomicmodels.