This paper provides an empirical analysis of the US swap rate curve using
principal components analysis (PCA) to identify the factors which explain the variation in
the data. We also investigate the forecasting performance of different econometric
models for individual maturities across the curve using daily data over the period 1998 to
2011. The PCA analysis indicates that the first two factors explain approximately 99.76%
of the cumulative variation in the sample. We also find that a continuous time modelling
approach has a satisfactory performance across the curve based on the RMSE.