Jean-Sébastien Fontaine - Latest

• The Share of Systematic Variations in the Canadian Dollar—Part II

  Staff Analytical Note 2017-1 Jean-Sébastien Fontaine, Guillaume Nolin

  This analytical note examines how much of the systematic variation in the Canadian dollar is attributable to its sensitivity to commodity prices. We introduce a new “oil” portfolio that captures systematic variations when the exchange rates of commodity exporters and commodity importers move in opposite directions.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Exchange rates JEL Code(s): F, F3, F31

• Repo Market Functioning when the Interest Rate Is Low or Negative

  Staff Discussion Paper 2017-3 Jean-Sébastien Fontaine, James Hately, Adrian Walton

  This paper investigates how a low or negative overnight interest rate might affect the Canadian repo markets. The main conclusion is that the repo market for general collateral will continue to function effectively.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Interest rates, Market structure and pricing JEL Code(s): D, D4, G, G1, G10, G12

• What Fed Funds Futures Tell Us About Monetary Policy Uncertainty

  Staff Working Paper 2016-61 Jean-Sébastien Fontaine

  The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main driver of uncertainty is a “path” factor signaling information about future policy actions, which is filtered from federal funds futures data.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Interest rates JEL Code(s): E, E4, E43, E44, E47, G, G1, G12, G13

• The Share of Systematic Variations in the Canadian Dollar—Part I

  Staff Analytical Note 2016-15 Jean-Sébastien Fontaine, Guillaume Nolin

  In this analytical note we show that the share of the systematic variations in the Canadian dollar has risen significantly in the past two decades. Systematic variations in the exchange rate are shared with other currencies. This parallels the equity market, where variations in the price of a given stock are shared with variations in the prices of other stocks.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Exchange rates JEL Code(s): F, F3, F31
• June 9, 2016

  Securities Financing and Bond Market Liquidity

  Financial System Review - June 2016 Jean-Sébastien Fontaine, Corey Garriott, Kyle Gray

  This report investigates how the markets for repurchase agreements and securities-lending agreements support the liquidity of Canadian bond markets. It also discusses how recent regulatory changes, as well as low interest rates and settlement failures, are potentially affecting securities-financing markets and, as a result, bond market liquidity.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G12, G2

• Tractable Term Structure Models

  Staff Working Paper 2015-46 Bruno Feunou, Jean-Sébastien Fontaine, Anh Le, Christian Lundblad

  We introduce a new framework that facilitates term structure modeling with both positive interest rates and flexible time-series dynamics but that is also tractable, meaning amenable to quick and robust estimation.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Interest rates, International financial markets, International topics, Monetary policy and uncertainty, Monetary policy transmission JEL Code(s): G, G1, G12

• Foreign Flows and Their Effects on Government of Canada Yields

  Staff Analytical Note 2015-1 Bruno Feunou, Jean-Sébastien Fontaine, James Kyeong, Jesus Sierra

  Foreign investment flows into Government of Canada (GoC) bonds have surged since the financial crisis. Our empirical analysis suggests that foreign flows of $150 billion lowered the 10-year GoC bond yield by 100 basis points between 2009 and 2012.

  Content Type(s): Staff research, Staff analytical notes Topic(s): International financial markets, International topics, Monetary policy transmission JEL Code(s): F, F3, F32

• Funding Liquidity, Market Liquidity and the Cross-Section of Stock Returns

  Staff Working Paper 2015-12 Jean-Sébastien Fontaine, René Garcia, Sermin Gungor

  Following theory, we check that funding risk connects illiquidity, volatility and returns in the cross-section of stocks. We show that the illiquidity and volatility of stocks increase with funding shocks, while contemporaneous returns decrease with funding shocks.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets JEL Code(s): E, E4, E43, H, H1, H12

• Bond Risk Premia and Gaussian Term Structure Models

  Staff Working Paper 2014-13 Bruno Feunou, Jean-Sébastien Fontaine

  Cochrane and Piazzesi (2005) show that (i) lagged forward rates improve the predictability of annual bond returns, adding to current forward rates, and that (ii) a Markovian model for monthly forward rates cannot generate the pattern of predictability in annual returns.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Interest rates JEL Code(s): E, E4, E43, E47, G, G1, G12

• Estimating the Policy Rule from Money Market Rates when Target Rate Changes Are Lumpy

  Staff Working Paper 2012-41 Jean-Sébastien Fontaine

  Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions and they do not distinguish between dates with and without scheduled announcements.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Interest rates JEL Code(s): E, E4, E43, E44, E47, G, G1, G12, G13