Unspanned Global Macro Risks in Bond Returns

This paper examines the macro-spanning hypothesis for bond returns in international markets. Based on a large panel of real-time macro variables that are not subject to revisions, wefind that global macro factors have predictive power for bond returns unspanned by yield factors.Furthermore, we estimate macro-finance term structure models (MTSMs) with the unspannedglobal macro factors and find that the global macro factors influence the market prices of leveland slope risks and induce co-movements in forward term premia in global bond markets