This paper evaluates how macroeconomics fluctuations (aggregate supply and demand shock) affect dynamics of forward yield curve in domestic and foreign debt market. We build a SVAR that includes output growth, inflation rate and interpretable economic variables extracted from forward yield curve (i.e. long term yield, forward interest rates spread and yield curve volatility) using Venezuelan monthly data from 2004 to 2011. We find that long term yield and spread are dominated by inflationary pressures while bond volatility majority responds to fluctuations in real sector after a goods market shock. The theoretical variables computed are more informative and economic powerful compared to traditional Nelson Siegel factors ( B0,B1 and B2). Finally, there are not qualitative differences across debt markets when aggregate supply or demand innovation occurs. This is not satisfied under a negative financial shock, where international valuation of credit conditions alters foreign investors’ decisions.

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