A Systematic View on Term Premia

  • Felix Geiger
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 654)


In recent years, the concept of term premia has become a focus of attention for academics, policy makers as well as the investment community. This heightened attention was initially triggered by the puzzling behavior of long-term interest rates in the Unites States and in other industrialized countries (Greenspan, 2005). The interest-rate conundrum manifested itself in stable and even falling long-term bond yields despite a reversal in the short-term FED funds cycle. Over the period between June 2004 and February 2005, the FED decided to increase the target rate by over 120 basis points. Over the same time, the 10-year treasury rate lost temporarily over 100 basis points. Among the global saving glut, declining inflation expectations, reduced global macroeconomic and financial uncertainty were cited as explanations attempts, shrinking bond term premia though were the most promising fact to capture the conundrum within a coherent macroeconomic framework (Kim and Wright, 2005; Rudebusch et al., 2006; Backus and Wright, 2007).


Central Bank Euro Area Default Risk Credit Spread Bond Yield 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  1. 1.Department of Economics Chair of Economic PolicyUniversity of HohenheimStuttgartGermany

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