Fixed Income

Centro de Finanças e Macroeconomia

Decomposition of Term Structure of Interest Rates in Brazil

Last update: 16/08/2022

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 (label: tp_x);
  2. The expected average level of short-term interest rates (label: er_x);
  3. Fitted yields (label: fy_x).

And x is the number of months, ranging from 0 to 119.

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