What Really Happened to U.S. Bond Yields

Peter Best, Alistair Byrne and Antti Ilmanen

Financial Analysts Journal, 1998, vol. 54, issue 3, 41-49

Abstract: Analysts have been able to say surprisingly little about the sources of the very volatile yields of long-term U.S. bonds in recent decades. We used surveys of economists' forecasts to decompose long-term bond yields into expectations of future inflation, expected real short-term interest rates, and the expected bond risk premium. Variation in the bond risk premium accounts for most of the variation in yields from period to period, but declines in all three components have contributed to the decline in yields of the past decade and a half.

Date: 1998
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DOI: 10.2469/faj.v54.n3.2179

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