Monetary Policy Surprises and the Cross-Section of Bond Market Reactions

We examine how monetary policy surprises — measured by the unexpected component of policy rate decisions — propagate across the yield curve. Using a high-frequency identification strategy centred on central bank announcement windows, we isolate the causal effect of surprises on yields at different maturities. The cross-section of bond market reactions reveals differential sensitivity to the level, slope, and curvature of the term structure, with implications for duration management and macro-risk hedging.