The Bond Yield Conundrum

Alternative Hypotheses and the State of the Economy

Research output: Working paperDiscussion paperOther research output

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Abstract

We study the bond yield conundrum in a macro-finance framework. Building upon a exible 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 conun- drum remains. The results in this paper indicate that the underlying observable drivers of the term premium are not yet fully understood.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages35
Volume2010-121
Publication statusPublished - 2010

Publication series

NameCentER Discussion Paper
Volume2010-121

Fingerprint

Finance
Bond yields
Term premium
Uncertainty
Role of the state
Financial markets

Keywords

  • affine models
  • yield curve
  • term premium
  • monetary policy

Cite this

Eijffinger, S. C. W., Mahieu, R. J., & Raes, L. B. D. (2010). The Bond Yield Conundrum: Alternative Hypotheses and the State of the Economy. (CentER Discussion Paper; Vol. 2010-121). Tilburg: Macroeconomics.
Eijffinger, S.C.W. ; Mahieu, R.J. ; Raes, L.B.D. / The Bond Yield Conundrum : Alternative Hypotheses and the State of the Economy. Tilburg : Macroeconomics, 2010. (CentER Discussion Paper).
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abstract = "We study the bond yield conundrum in a macro-finance framework. Building upon a exible 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 conun- drum remains. The results in this paper indicate that the underlying observable drivers of the term premium are not yet fully understood.",
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Eijffinger, SCW, Mahieu, RJ & Raes, LBD 2010 'The Bond Yield Conundrum: Alternative Hypotheses and the State of the Economy' CentER Discussion Paper, vol. 2010-121, Macroeconomics, Tilburg.

The Bond Yield Conundrum : Alternative Hypotheses and the State of the Economy. / Eijffinger, S.C.W.; Mahieu, R.J.; Raes, L.B.D.

Tilburg : Macroeconomics, 2010. (CentER Discussion Paper; Vol. 2010-121).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - The Bond Yield Conundrum

T2 - Alternative Hypotheses and the State of the Economy

AU - Eijffinger, S.C.W.

AU - Mahieu, R.J.

AU - Raes, L.B.D.

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N2 - We study the bond yield conundrum in a macro-finance framework. Building upon a exible 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 conun- drum remains. The results in this paper indicate that the underlying observable drivers of the term premium are not yet fully understood.

AB - We study the bond yield conundrum in a macro-finance framework. Building upon a exible 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 conun- drum remains. The results in this paper indicate that the underlying observable drivers of the term premium are not yet fully understood.

KW - affine models

KW - yield curve

KW - term premium

KW - monetary policy

M3 - Discussion paper

VL - 2010-121

T3 - CentER Discussion Paper

BT - The Bond Yield Conundrum

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CY - Tilburg

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Eijffinger SCW, Mahieu RJ, Raes LBD. The Bond Yield Conundrum: Alternative Hypotheses and the State of the Economy. Tilburg: Macroeconomics. 2010. (CentER Discussion Paper).