IDEAS home Printed from
   My bibliography  Save this article

Making sense of international interest rate movements




In this article, we describe a framework for analysing movements in government bond interest rates and present some results from applying this approach. Our framework disaggregates movements in nominal rates into estimated changes in real interest rates and inflation expectations. In addition, we discuss a measure of interest rate uncertainty, a factor which will often influence movements in these components. Since any long-term bond can be thought of as equivalent to a sequence of shorter-term bonds, we also calculate implied forward measures of each of these factors to better understand not only which factors are driving movements in nominal interest rates but also over which periods of time (i.e., current, future or some combination of the two) these factors are having an effect. We use the method to analyse movements in term interest rates in the US and the UK, two major markets with good data, since the global financial crisis intensified in 2008. It appears that the global financial crisis has had a largely temporary impact on longer-term measures of interest rate components: looking ahead, markets appear not to expect longer-term interest rates to be much different than they were prior to 2008. There are limits to our ability to apply these techniques directly to New Zealand markets, but the Reserve Bank of New Zealand uses them to help make sense of what is going on in international bond markets which in turn directly affect longer-term interest rates in New Zealand.

Suggested Citation

  • Hamish Pepper & Enzo Cassino, 2011. "Making sense of international interest rate movements," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 74, pages 5-14, March.
  • Handle: RePEc:nzb:nzbbul:march2011:7

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Kristopher Gerardi & Andreas Lehnert & Shane M. Sherlund & Paul Willen, 2008. "Making Sense of the Subprime Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 69-159.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nzb:nzbbul:march2011:7. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Reserve Bank of New Zealand Knowledge Centre). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.