Estimating the OIS term premium with analyst expectation surveys

• Barahona, Ricardo ^[1] ; Rodríguez-Moreno, María ^[1]
  1. [1] Banco de España
• Localización: Documentos ocasionales - Banco de España, ISSN 1696-2222, Nº. 10, 2024
• Idioma: inglés
• Enlaces
  • Texto completo
• Resumen

  • This paper estimates the euro area overnight index swap yield curve, which is considered to be the risk-free yield curve in the euro area, using an affine term structure model. We expand the Adrian, Crump and Moench (2013) procedure with survey data to dissect rates into short-term expectations and term premia. This approach reveals the market expectations of short-term interest rates and monetary policy, and gauges the premium demanded by risk-averse investors in uncertain interest rate environments. As compared to the simpler model, the use of survey information in our estimation yields estimates more aligned with professional expectations data. Our approach enables us to obtain daily forecasts of short-term rates for up to 10 years ahead which are aligned with professional surveys on interest rates. Our estimation of real-time information on short-term rate expectations proves valuable as it complements the survey data, which are typically available at longer intervals.