Information content of the fed funds rates

This study shows that the Fed Funds spot rate mostly affects the level of key interest rates while the Fed Funds futures rate tends to affect both the level and the volatility. Such effects are more concentrated on the shorter segment of the yield curve. In addition, only an unexpected change in the target rate affects both the level and the volatility of interest rates. Finally, the FOMC's increased disclosure of its policy stance has a calming effect on the volatility of key interest rates. (c) 2005 Wiley Periodicals, Inc.