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More on U.S. Treasury term premiums: spot and expected measures


  • Durham, J. Benson

    (Federal Reserve Bank of New York)


Several studies that use affine term structure models (ATSMs) or survey data suggest that subdued nominal U.S. Treasury yields during the global financial crisis and its aftermath primarily reflected exceptionally low, if not negative, term premiums as distinct from depressed anticipated short rates. However, this literature pays little attention to the length of time market participants anticipated low term premiums to prevail, as captured by the “forward” or “expected” term premium over a given horizon, distinct from the “spot” term premium. Besides the implications for investors at the back end of the term structure, this issue relates to recent policy-related studies that argue that the persistence of interest rate shocks affects real outcomes. Unlike the consensus inference on low spot term premiums, the evidence on expected term premiums is somewhat mixed. Some ATSMs suggest that expected term premiums did drop substantially along with spot measures after 2007, but the simple survey-based estimate reported here notably indicates the opposite.

Suggested Citation

  • Durham, J. Benson, 2013. "More on U.S. Treasury term premiums: spot and expected measures," Staff Reports 658, Federal Reserve Bank of New York, revised 01 May 2014.
  • Handle: RePEc:fip:fednsr:658 Note: Previous title: "Another View on U.S. Treasury Term Premiums"

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    References listed on IDEAS

    1. Bacchetta, Philippe & Mertens, Elmar & van Wincoop, Eric, 2009. "Predictability in financial markets: What do survey expectations tell us?," Journal of International Money and Finance, Elsevier, vol. 28(3), pages 406-426, April.
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    6. Adrian, Tobias & Crump, Richard K. & Moench, Emanuel, 2013. "Pricing the term structure with linear regressions," Journal of Financial Economics, Elsevier, vol. 110(1), pages 110-138.
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    8. Kozicki, Sharon & Tinsley, P. A., 2001. "Shifting endpoints in the term structure of interest rates," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 613-652, June.
    9. Werner, Thomas & Lemke, Wolfgang, 2009. "The term structure of equity premia in an affine arbitrage-free model of bond and stock market dynamics," Working Paper Series 1045, European Central Bank.
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    11. J. Benson Durham, 2007. "Implied interest rate skew, term premiums, and the "conundrum"," Finance and Economics Discussion Series 2007-55, Board of Governors of the Federal Reserve System (U.S.).
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    More about this item


    Treasury term premium; monetary policy;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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