Affine term structure models (ATSMs) are known to have a trade-off in predicting future Treasury yields and fitting the time-varying volatility of interest rates. First, I empirically study the role of macroeconomic variables in simultaneously achieving these two goals under affine models. To...

This paper empirically studies the role of macro-factors in explaining and predicting daily bond yields. In general, macro-finance models use low-frequency data to match with macroeconomic variables available only at low frequencies. To deal with this, we construct and estimate a tractable...