DOMESTIC MACROECONOMIC NEWS AND FOREIGN INTEREST-RATES

This study examines the impact of US and UK news on futures prices of US, UK, German, and Japanese government bonds. We find that certain US information has a significant influence on German, Japanese, and Brit ish interest rates, while UK information has almost no effect on forei gn rates. Second, we examine the foreign term structure to investigate whether the importance of US information arises because it either sig nals common world-wide shocks or induces an anticipated exchange rate stabilization by foreign central banks. The evidence is mixed, except for the US CPI surprise which appears to provide information about a c ommon world-wide shock.