Price discovery on traded inflation expectations: does the financial crisis matter?

Arbeitspapier

We analyze contributions of different markets to price discovery on traded inflation expectations and how it changed during the financial crisis. The quicker information is processed on one market and the less one market is disrupted by the financial crisis the more valuable is its information for central banks and market participants. We use a new high frequency data set on inflation-indexed and nominal government bonds as well as inflation swaps to calculate information shares of break-even inflation rates in the euro area and the US. For maturities up to 5 years new information comes from both the swap and the bond markets. For longer maturities the swap market provides less and less information in the euro area. In the US where the market volume of inflation-linked bonds is large the bond market dominates the price discovery process for all maturities. The severe financial crisis that spread out in Autumn 2008 drove a wedge between bond and swap break-even inflation rates in both currencies. Price discovery ceased to take place on the swap market. Disruptions coming from the short-end of the market even separated price formation on both segments for maturities of up to 6 years in the US. Against the backdrop of the most severe financial crisis in decades contributions to price formation concentrated a lot more on the presumably safest financial instrument: government bonds.

Angaben zum Objekt

• ISBN: 978-3-86558-554-7
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion Paper Series 1 ; No. 2009,25

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; International Finance Forecasting and Simulation: Models and Applications ; International Financial Markets
• Thema: Inflation-linked bonds ; inflation swaps ; price discovery ; financial crisis ; Rentenmarkt ; Indexanleihe ; Börsenkurs ; Informationsverbreitung ; Internationaler Preiszusammenhang ; Zinsswap ; Finanzmarktkrise ; USA ; EU-Staaten

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Schulz, Alexander ; Stapf, Jelena
• Ereignis: Veröffentlichung
• (wer): Deutsche Bundesbank
• (wo): Frankfurt a. M.
• (wann): 2009

Weitere Informationen

• Handle: http://hdl.handle.net/10419/27924
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ