How to forecast the yield curve

There are many ideas on this and clearly no one has got it quite right yet, or if so they haven't shared their theory for fear that everyone will become pundits and able to cash in as knowledge and predictive power is certainly closely correlated to financial return!

Of course there are many well known econometric models that can be used, which all factor in an increasingly complex number of factors and then do calculations on the back of it to turn out sometimes weird and wonderful - and wildly incorrect in the light of future knowledge - predictions.

One interesting development is so called interactive models, that are actually capable of updating and changing themselves, rather than starting with conditions x and extrapolating, they work out what happens at each stage, and so in this manner are becoming more like humans in terms of always reacting to the situations that are seen at a particular time.

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