More on U.S. Treasury term premiums: spot and expected measures
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.
|Date of creation:||01 Dec 2013|
|Date of revision:||01 May 2014|
|Note:||Previous title: "Another View on U.S. Treasury Term Premiums"|
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kim, Don H. & Orphanides, Athanasios, 2012.
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"Pricing the term structure with linear regressions,"
340, Federal Reserve Bank of New York.
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- 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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