Macroeconomic announcement effects on the covariance structure of government bond returns

This paper concerns the effects of macroeconomic announcements on the covariance structure of US government bond returns for six different maturities; the study shows that the conditional variances, covariances, and correlation coefficients are significantly greater on announcement days. On non-announcement days, the correlation coefficients are relatively large and are greater the closer the bonds are with respect to the time to maturity. The maturity dependency is substantially dampened on announcement days and, hence, releases of macroeconomic news induce common movement in the government bond market that strengthen the correlations. q 2000 Elsevier Science B.V. All rights reserved. JEL classification: G12; C32