Unexpected Fed rate changes have major impact on bond yields
The study looked at how changes in interest rates are affected by surprises in monetary policy actions. By analyzing data from the futures market, researchers found that expected changes in interest rates have a small impact, while unexpected changes have a significant effect. These findings support the idea that interest rates respond more to unexpected events. Surprises in target rate changes don't really influence expectations of future actions, which could explain why short-term yield curve predictions are often inaccurate.