Macro demand-based rates strategies

The pace of aggregate demand in the macroeconomy exerts pressure on interest rates. In credible inflation targeting regimes, excess demand should be negatively related to duration returns and positively to curve-flattening returns. Indeed, point-in-time market information states of various macro demand-related indicators all have helped predict returns of directional and curve positions in interest rate swaps across developed and emerging markets. The predictive power of an equally weighted composite demand score has been highly significant at a monthly or quarterly frequency and the economic value of related strategies has been sizeable.

View full post based on proprietary research of Macrosynergy.

A Jupyter notebook for audit and replication of the research results can be downloaded here. The notebook operation requires access to J.P. Morgan DataQuery to download data from JPMaQS, a premium service of quantamental indicators. J.P. Morgan offers free trials for institutional clients. Also, there is an?academic research support program?that sponsors data sets for relevant projects.