Authors: Tobias Adrian and Emanuel Moench

We estimate the time series and cross section of Treasury returns via three-step ordinary least squares. Our approach allows computationally fast estimation of term structure models with a large number of pricing factors. Even though we do not impose yield cross-equation restrictions in the estimation, we show that our return regressions generate a term structure of interest rates with small yield errors compared with commonly reported specifications, both in- and out-of-sample.