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Working Paper
Why Have Long-term Treasury Yields Fallen Since the 1980s? Expected Short Rates and Term Premiums in (Quasi-) Real Time
Treasury yields have fallen since the 1980s. Standard decompositions of Treasury yields into expected short-term interest rates and term premiums suggest term premiums account for much of the decline. In an alternative real-time decomposition, term premiums have fluctuated in a stable range, while long-run expected short-term interest rates have fallen. For example, a real-time decomposition of the 10-yr. Treasury yield shows term premiums essentially equal in late 2013 and 2023, while the long-run value of expected short-term interest rates is estimated to have fallen in a manner similar to ...