The US yield curve for the past weeks has been volatile. The daily change for today, using the constant maturity yields from the Treasury, is in the magnitude of over 10 basis points at the longer end of the curve.
Presumably, these movements have something to do with Europe, as the following article suggests: http://finance.yahoo.com/news/wall-st-falls-europe-worries-200935690.html.
The graph below plots the yield curves for the past 2 days, and shows the change in yield in a bar graph.
What I find interesting is that there tends to be these back and forth movement of the yield curve with these types of news. For example, below are 3 graphs for May 22 to May 24. The yield swings back and forth – up the first day, down the second, and up again on the third.
Because of these yield patterns, I am sometimes skeptical of research that uses event study (particularly 1 day change in yields) to measure effects of monetary policy - particularly on a new policy that market participants would not know well the effects. The 3 day cumulative change for the 10-year yield here is just two basis points. If one measures the effect of the news here, and use only one of the days, the estimated effected would be anywhere from 4 basis points to –6 basis points.
In a paper I hope to have time to work on again soon, I will dive into this issue more.
