The bond yield conundrum: alternative hypotheses and the state of the economy

Sylvester Eijffinger, Ronald Mahieu and Louis Raes

No 8063, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the bond yield conundrum in a macro-finance framework. Building upon a flexible and non-structural macro-finance model, we test the hypothesis that the bond yield conundrum is connected to various sources of uncertainty in the financial markets. Moreover we explicitly test for the role of the state of the economy. Our findings give a richer description of the drivers of the term premium yet the conundrum remains. The results in this paper indicate that the underlying observable drivers of the term premium are not yet fully understood.

Keywords: Affine models; Monetary policy; Term premium; Yield curve (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 (search for similar items in EconPapers)
Date: 2010-10
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Citations: View citations in EconPapers (2)

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Working Paper: The Bond Yield Conundrum: Alternative Hypotheses and the State of the Economy (2010)
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