Renda Fixa

Centro de Finanças e Macroeconomia

Fixed Income

Decomposition of Term Structure of Interest Rates in Brazil

Authors: Guilherme Souza e Igor Martins

Following Adrian, Crump, and Moech (2013)¹, we decompose treasury yields into two components:

  1. Expectations of the future path for short-term Treasury yields;
  2. Compensation regarding the risk that interest rates may change over the bond’s life, also known as Treasury term premium.

We provide estimates from 2004 to 2022 for maturities ranging from 1 month to 10 years. Downloadable data:

  1. Estimates of the term premium for monthly Treasury maturities;
  2. The expected average level of short-term interest rates;
  3. Fitted yields.

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¹Adrian, Crump and Emanuel Moench, 2013 – Pricing the Term Structure with Linear Regressions