PCA on term structure of interest rates

Interest rate time series seems to be non-stationary whenever test is performed

But covariance or correlation matrix is derived from term structure time series which are non stationary and later PCA is performed on that covariance or correlation matrix.

Is it appropriate to derive Covariance or correlation matrix from non stationary series and use it for PCA?

Applying Kalman filter on term structure of interest rates is any better than PCA?

• Are the increments of your time series non-stationary? It is similar to a random walk. If you have white noise $X_i$ then $S_n = \sum_{i=1}^n X_i$ is non-stationary but $X_i$ is. – Ric Nov 20 '14 at 11:29