The term structure of expectations and bond yields
Richard Crump (),
Stefano Eusepi () and
Emanuel Moench ()
No 775, Staff Reports from Federal Reserve Bank of New York
Bond yields can be decomposed into expected short rates and term premiums. We directly measure the former using all available U.S. professional forecasts and obtain the latter as the difference between bond yields and survey-based expected short rates. While the behavior of nominal and real short rate expectations is consistent with standard macroeconomic theory, term premiums account for the bulk of the cross-sectional and time series variation in yields. They also largely explain the yield curve's reaction to a host of structural economic shocks. This dramatic failure of the expectations hypothesis highlights the importance of term premiums for macro-financial transmission.
Keywords: term premiums; expectations formation; survey forecasts; monetary policy; business cycle fluctuations (search for similar items in EconPapers)
JEL-codes: D84 E44 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2016-05-01, Revised 2018-04-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed
Downloads: (external link)
https://www.newyorkfed.org/research/staff_reports/sr775.html Summary (text/html)
https://www.newyorkfed.org/medialibrary/media/rese ... orts/sr775.pdf?la=en Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:775
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Amy Farber ().