Central Bank Communication and the Yield Curve

Matteo Leombroni, Andrea Vedolin, Gyuri Venter, Paul Whelan*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

37 Downloads (Pure)


In this paper, we argue that monetary policy in the form of central bank communication can shape long-term interest rates by changing risk premia. Using high-frequency movements of default-free rates and equity, we show that monetary policy communications by the European Central Bank on regular announcement days led to a significant yield spread between peripheral and core countries during the European sovereign debt crisis by increasing credit risk premia. We also show that central bank communication has a powerful impact on the yield curve outside regular monetary policy days. We interpret these findings through the lens of a model linking information embedded in central bank communication to sovereign yields.
Original languageEnglish
JournalJournal of Financial Economics
Issue number3
Pages (from-to)860-880
Number of pages21
Publication statusPublished - Sept 2021

Bibliographical note

Published online 5 May 2021.


  • Interest rates
  • Monetary policy
  • Central bank communication
  • Eurozone

Cite this