Economic research: What drives bond yields - Part 4: Natural rates vs neutral rates

This note, the fourth in a series, provides a topical example of a factor – equilibrium interest rates – which could impact expectations of short-term real interest rates, a key sub-component of bond yields. It builds on the concepts outlined in the first note of the series, the estimates and trends covered in the second note, and the drivers of the sub-components of yields identified in the third note. Future instalments in the series will include a deep dive into a topical factor that could influence another key building block of yields – the risk (or ‘term’) premium – as well as present long-term projections for bond yields.

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