The differential impact of monetary policy announcements and explanatory minutes releases on the Australian interest rate futures market

Unlike US and Continental European jurisdictions, Australian monetary policy announcements are not followed promptly by projections materials or comprehensive summaries that explain the decision process. This information is disclosed 2weeks later when the explanatory minutes of the Reserve Bank boar...

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Bibliographic Details
Published in:Pacific-Basin finance journal 2014-09, Vol.29, p.261-271
Main Authors: McCredie, Bronwyn, Docherty, Paul, Easton, Steve, Uylangco, Katherine
Format: Article
Language:English
Subjects:
Explanatory minutes
Global Financial Crisis
Interest rate futures market
Monetary policy announcement
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Summary:Unlike US and Continental European jurisdictions, Australian monetary policy announcements are not followed promptly by projections materials or comprehensive summaries that explain the decision process. This information is disclosed 2weeks later when the explanatory minutes of the Reserve Bank board meeting are released. This paper is the first study to exploit the features of the Australian monetary policy environment in order to examine the differential impact of monetary policy announcements and explanatory statements on the Australian interest rate futures market. We find that both monetary policy announcements and explanatory minutes releases have a significant impact on the implied yield and volatility of Australian interest rate futures contracts. When the differential impact of these announcements is examined using the full sample, no statistically significant difference is found. However, when the sample is partitioned based on stable periods and the Global Financial Crisis, a differential impact is evident. Further, contrary to the findings of Kim and Nguyen (2008), Lu et al. (2009), and Smales (2012a), the response along the yield curve, is found to be indifferent between the short and medium terms. •Announcements and releases impact the yields of interest rate futures.•Announcements and releases impact the volatility of interest rate futures.•Announcements and releases have a differential impact in times of crisis.•The response along the yield curve is indifferent between the short and medium term.
ISSN:0927-538X
1879-0585
DOI:10.1016/j.pacfin.2014.05.001