The Bank for International Settlements has published a working paper on how US Treasury yields respond to major US macroeconomic data releases under different information conditions. Using intraday moves around six key announcements from 1998 to 2024, the paper finds two opposing effects: higher disagreement among forecasters before a release reduces the yield response, while higher uncertainty about the future path of policy rates increases it. It also finds that the market’s response changed after Covid-19, with inflation data becoming much more influential for rates when policy uncertainty is high and payrolls data becoming less so. The analysis covers inflation, employment, GDP and other major releases and studies 2-year, 5-year and 10-year Treasury futures. In the pre-2020 sample, most releases showed the same basic pattern of weaker yield reactions when forecast dispersion was high and stronger reactions when short-rate uncertainty was high, but inflation was an exception because CPI surprises did not become more powerful when policy uncertainty rose. In the post-Covid period, that changed sharply. CPI surprises became strongly amplified by policy uncertainty across maturities, while the earlier sensitivity of nonfarm payrolls surprises to policy uncertainty weakened and lost statistical significance. The paper attributes this to inflation becoming a more diagnostic signal for the Federal Reserve’s rate path after the inflation surge, while payrolls became less informative partly because of labor market dislocations and data quality issues. To explain the results, the authors develop a Bayesian learning model in which investors use macro releases to update views on both the state of the economy and the policy reaction function. In that framework, wide forecast disagreement makes a release a noisier guide to future policy, while high policy uncertainty gives each release more weight. Structural estimation in the paper supports the view that post-Covid changes were driven more by shifts in the information content of specific releases, especially CPI and nonfarm payrolls, than by a change in the underlying monetary policy slope spread itself.
Bank for International Settlements2026-06-16
Bank for International Settlements working paper finds forecast disagreement dampens US Treasury yield reactions while monetary policy uncertainty amplifies them
The Bank for International Settlements has published a working paper finding that US Treasury yields react less to macro data when forecasters disagree more, but react more when monetary policy uncertainty is higher. It also finds a post-Covid shift in which CPI surprises became much more influential for yields under high policy uncertainty, while nonfarm payrolls surprises became less so. The paper links this to changes in how informative each release is about the future policy path.