Bond price and its relationship with united states macroeconomic variables

The U.S. bond market is the largest market in the world but not much is understood in terms of macroeconomic factors that could influence the bond prices in United States. Based on a Vector Autoregressive (VAR) model, this paper examines the impact of three macroeconomic factors namely: interest rates, Inflation rates, and Exchange rates of the U.S Government bond and Corporate Bonds for a period from 1 January 2006 to 31 December 2010. The findings support the expected hypotheses that interest rate, inflation rate and exchange rate have significant influence on the U.S bond prices. It indicates that there is negative relationship between interest rates, inflation rates and exchange rate with the U.S bond prices