Working Paper Series no. 43: The Information Content of the Term Structure: An Application to French Government Bonds (in French)

Abstract

This paper evaluates the information content of the term structure about future changes in interest rates and changes in inflation rate, in France. A data set has been constructed, which contains zero-coupon yield curves on government bonds over the period 1980-95. The information content is generally very weak over the whole period. On the contrary, over the period 1985-95, the term structure contains information for certain maturities. On the one hand, spreads vis-à-vis 2-year rates are informative for future changes in short-term rates, whereas spreads vis-à-vis 3-year rates are informative for both future changes in short-term rates and future changes in long-term rates; on the second hand, the spreads from (2- versus 1-year rates) to (5- versus 1-year rates) and (4- versus 2-year rates) are the most informative for future changes in inflation rate.

Eric Jondeau and Roland Ricart
July 1997

Classification JEL : E43

Keywords : Term structure of interest rates, Expectations hypothesis, Fisher relation, Information Content