Forecasting US Yield Curve
I’m new to a fixed-income trading desk, and I wanted to know how I can model and project the yield curve. From my reading, I found that one approach is to outline a path for the monetary policy rate until it reaches the neutral rate. Once this is done, I would have reference rate values for certain time periods. It makes sense to me to then derive the rates and discount factors for these periods using forwards, which would correspond to the zero-coupon swap curve. After that, I would add term premiums and the swap spread for each period to obtain the yield curve.
I wanted to know if this approach is valid or if there are better ways to model and project this curve to take advantage of trades.
Bump
Maybe read Ramaswamy’s notes on term funding premium from JPM. Sounds sort of to what ur describing.
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