The Bond Yield Conundrum: Alternative Hypotheses and the State of the Economy

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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
PublisherEBC
Number of pages35
Volume2010-30
Publication statusPublished - 2010

Publication series

NameEBC Discussion Paper
Volume2010-30

Keywords

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

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