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Chart 1. 10-Year Government Bond: Nominal Yield

Percent, monthly

Period Canada Germany United Kingdom Japan United States
January 2000 6.46 5.67 5.62 1.86 6.77
February 2000 6.31 5.62 5.44 1.96 6.60
March 2000 6.00 5.43 5.18 1.97 6.40
April 2000 5.88 5.34 5.14 1.88 6.16
May 2000 6.19 5.51 5.23 1.83 6.55
June 2000 5.86 5.31 5.05 1.80 6.22
July 2000 5.83 5.39 5.09 1.85 6.14
August 2000 5.72 5.31 5.18 1.86 5.96
September 2000 5.69 5.33 5.25 1.99 5.99
October 2000 5.69 5.29 5.09 1.89 5.89
November 2000 5.69 5.25 4.98 1.78 5.83
December 2000 5.36 5.00 4.80 1.66 5.41
January 2001 5.44 4.90 4.74 1.53 5.38
February 2001 5.43 4.87 4.72 1.38 5.35
March 2001 5.30 4.78 4.62 1.15 5.20
April 2001 5.62 4.97 4.88 1.31 5.44
May 2001 5.88 5.21 5.04 1.23 5.65
June 2001 5.75 5.19 5.11 1.16 5.56
July 2001 5.83 5.20 5.11 1.28 5.50
August 2001 5.58 5.03 4.91 1.30 5.30
September 2001 5.40 5.05 4.94 1.30 5.15
October 2001 5.39 4.83 4.78 1.30 4.97
November 2001 5.30 4.68 4.59 1.31 5.05
December 2001 5.53 4.92 4.84 1.34 5.53
January 2002 5.46 5.01 4.86 1.41 5.45
February 2002 5.42 5.07 4.87 1.51 5.36
March 2002 5.74 5.30 5.16 1.43 5.71
April 2002 5.74 5.30 5.17 1.35 5.60
May 2002 5.68 5.32 5.21 1.34 5.52
June 2002 5.50 5.17 5.04 1.31 5.28
July 2002 5.43 5.02 4.96 1.23 5.04
August 2002 5.25 4.74 4.72 1.19 4.69
September 2002 4.98 4.55 4.48 1.10 4.30
October 2002 5.24 4.65 4.61 1.06 4.40
November 2002 5.21 4.68 4.63 0.96 4.48
December 2002 5.09 4.52 4.55 0.95 4.46
January 2003 5.09 4.36 4.38 0.84 4.46
February 2003 5.13 4.17 4.22 0.82 4.29
March 2003 5.10 4.23 4.34 0.72 4.18
April 2003 5.16 4.38 4.48 0.62 4.31
May 2003 4.80 4.07 4.23 0.53 3.88
June 2003 4.44 3.89 4.13 0.53 3.63
July 2003 4.85 4.19 4.43 0.93 4.30
August 2003 5.01 4.33 4.59 1.09 4.82
September 2003 4.85 4.40 4.68 1.36 4.62
October 2003 4.91 4.43 4.88 1.30 4.62
November 2003 4.95 4.56 5.03 1.29 4.61
December 2003 4.83 4.51 4.87 1.25 4.56
January 2004 4.73 4.38 4.76 1.24 4.43
February 2004 4.61 4.34 4.78 1.17 4.36
March 2004 4.43 4.14 4.67 1.24 4.10
April 2004 4.77 4.33 4.92 1.39 4.64
May 2004 4.91 4.47 5.06 1.39 5.01
June 2004 5.04 4.51 5.13 1.66 5.01
July 2004 4.85 4.41 5.04 1.67 4.76
August 2004 4.71 4.25 4.95 1.58 4.55
September 2004 4.62 4.18 4.86 1.43 4.36
October 2004 4.60 4.06 4.72 1.40 4.33
November 2004 4.55 3.95 4.65 1.39 4.40
December 2004 4.41 3.74 4.49 1.32 4.42
January 2005 4.33 3.67 4.50 1.31 4.37
February 2005 4.28 3.66 4.54 1.32 4.28
March 2005 4.42 3.81 4.74 1.38 4.61
April 2005 4.26 3.62 4.58 1.23 4.45
May 2005 4.14 3.44 4.37 1.20 4.24
June 2005 3.93 3.28 4.25 1.17 4.08
July 2005 4.00 3.29 4.27 1.19 4.24
August 2005 3.98 3.32 4.29 1.37 4.32
September 2005 3.90 3.16 4.17 1.33 4.28
October 2005 4.06 3.33 4.31 1.51 4.54
November 2005 4.11 3.53 4.26 1.52 4.64
December 2005 4.03 3.44 4.17 1.52 4.55
January 2006 4.02 3.39 4.02 1.46 4.47
February 2006 4.16 3.55 4.10 1.60 4.61
March 2006 4.19 3.72 4.26 1.75 4.78
April 2006 4.40 4.00 4.46 1.91 5.04
May 2006 4.39 4.07 4.58 1.94 5.16
June 2006 4.43 4.07 4.60 1.92 5.14
July 2006 4.43 4.09 4.59 1.97 5.10
August 2006 4.22 3.96 4.57 1.87 4.91
September 2006 4.04 3.82 4.47 1.71 4.76
October 2006 4.08 3.85 4.53 1.80 4.76
November 2006 3.98 3.77 4.46 1.77 4.62
December 2006 3.96 3.83 4.53 1.74 4.60
January 2007 4.11 4.07 4.76 1.75 4.79
February 2007 4.10 4.11 4.79 1.75 4.76
March 2007 4.04 4.00 4.72 1.67 4.62
April 2007 4.15 4.22 4.93 1.70 4.75
May 2007 4.25 4.34 5.03 1.72 4.78
June 2007 4.55 4.63 5.31 1.95 5.14
July 2007 4.53 4.58 5.29 1.95 5.06
August 2007 4.38 4.38 5.05 1.75 4.80
September 2007 4.32 4.33 4.91 1.68 4.65
October 2007 4.33 4.38 4.88 1.71 4.65
November 2007 4.11 4.21 4.67 1.62 4.35
December 2007 4.01 4.34 4.65 1.61 4.34
January 2008 3.89 4.16 4.46 1.49 4.01
February 2008 3.91 4.10 4.61 1.49 4.07
March 2008 3.64 3.99 4.45 1.41 3.87
April 2008 3.77 4.24 4.64 1.53 4.00
May 2008 3.76 4.36 4.84 1.77 4.18
June 2008 3.88 4.64 5.14 1.88 4.39
July 2008 3.83 4.63 5.00 1.72 4.28
August 2008 3.68 4.36 4.69 1.58 4.16
September 2008 3.66 4.30 4.55 1.58 4.00
October 2008 3.84 4.15 4.59 1.59 4.44
November 2008 3.78 3.89 4.32 1.56 4.24
December 2008 3.17 3.39 3.66 1.43 3.06
January 2009 3.07 3.47 3.75 1.30 3.19
February 2009 3.22 3.55 3.80 1.36 3.53
March 2009 3.01 3.50 3.33 1.36 3.37
April 2009 3.10 3.58 3.48 1.50 3.38
May 2009 3.38 3.81 3.73 1.48 3.78
June 2009 3.59 3.90 3.82 1.53 4.23
July 2009 3.60 3.70 3.91 1.40 4.04
August 2009 3.64 3.59 3.81 1.44 4.03
September 2009 3.56 3.56 3.76 1.36 3.83
October 2009 3.61 3.54 3.67 1.37 3.78
November 2009 3.60 3.55 3.87 1.39 3.80
December 2009 3.64 3.48 4.02 1.29 3.95
January 2010 3.72 3.57 4.16 1.35 4.07
February 2010 3.67 3.46 4.22 1.36 4.03
March 2010 3.71 3.39 4.23 1.34 4.02
April 2010 3.82 3.35 4.25 1.34 4.10
May 2010 3.52 3.05 3.91 1.27 3.70
June 2010 3.39 2.88 3.71 1.19 3.49
July 2010 3.31 2.85 3.61 1.08 3.27
August 2010 3.09 2.59 3.34 1.01 2.90
September 2010 3.03 2.51 3.22 1.10 2.87
October 2010 2.93 2.56 3.17 0.96 2.75
November 2010 3.23 2.76 3.43 1.11 2.96
December 2010 3.36 3.18 3.73 1.25 3.54
January 2011 3.42 3.26 3.84 1.26 3.63
February 2011 3.58 3.43 4.00 1.36 3.80
March 2011 3.43 3.43 3.85 1.31 3.64
April 2011 3.49 3.57 3.87 1.32 3.69
May 2011 3.24 3.29 3.61 1.22 3.39
June 2011 3.07 3.14 3.53 1.18 3.22
July 2011 3.03 2.96 3.43 1.17 3.23
August 2011 2.55 2.48 2.87 1.12 2.47
September 2011 2.31 2.02 2.56 1.06 2.11
October 2011 2.41 2.22 2.61 1.06 2.29
November 2011 2.24 2.11 2.36 1.07 2.12
December 2011 2.11 2.18 2.24 1.06 2.08
January 2012 2.11 2.02 2.17 1.04 2.06
February 2012 2.16 2.05 2.29 1.05 2.05
March 2012 2.23 2.05 2.38 1.05 2.28
April 2012 2.18 1.87 2.25 1.01 2.14
May 2012 1.96 1.58 1.99 0.94 1.85
June 2012 1.78 1.52 1.81 0.89 1.66
July 2012 1.70 1.41 1.69 0.82 1.56
August 2012 1.89 1.52 1.72 0.86 1.74
September 2012 1.91 1.62 1.76 0.85 1.76
October 2012 1.89 1.61 1.81 0.83 1.78
November 2012 1.81 1.49 1.82 0.81 1.68
December 2012 1.87 1.46 1.89 0.80 1.75
January 2013 2.02 1.60 2.13 0.84 1.97
February 2013 ND 1.65 2.26 0.81 2.06

Note: 10-year zero-coupon sovereign bond yields.

Source: Federal Reserve Board staff estimates.

ND No data.  Return to text

 

Chart 2. Decomposition of 10-Year Treasury Yield

Series: Expected average inflation rate, expected average real short rate, and term premium
Horizon: 2000 to 2013
Description: Data are plotted as three curves. Units are percent; data frequency is monthly.

The expected average inflation rate starts in early 2000 slightly above 3 and gradually declines to about 2.5 by early 2003. It then gradually increases to reach about 2.9 during 2006 and 2007 and has been on a downward trend since then, ending around 2.25 in early 2013.

The expected average real short rate starts in early 2000 slightly above 2 and generally remains at that level until around late 2000, when it quickly falls over the next few years to about 0.7 by early 2003. The series then rises again to reach about 1.6 by late 2006 and generally remains there until late 2007. It subsequently declines and is around zero in early 2013.

The term premium starts in early 2000 around 1.5 and generally fluctuates within a range of 0.5 to 1.5 until late 2004. It stays around 0.5 between late 2004 and early 2008 and then fluctuates within a range of 0.2 to 1.5 through early 2011 before declining rapidly and reaching negative territory in the summer of 2011, where it has stayed since. The term premium is around negative 0.35 in early 2013.

Note: Decomposition of 10-year zero-coupon Treasury yield based on the term structure model of D'Amico, Kim, and Wei (2010).

Source: Federal Reserve Board; Barclays PLC; staff calculations.

 

Chart 3. Inflation-Indexed Government Bond Yield

Percent, monthly

Period Canada Germany United Kingdom Japan United States
January 2000 4.04 ND 2.11 ND 4.36
February 2000 3.96 ND 2.17 ND 4.29
March 2000 3.89 ND 2.05 ND 4.16
April 2000 3.71 ND 2.07 ND 3.99
May 2000 3.79 ND 2.14 ND 4.14
June 2000 3.82 ND 2.12 ND 4.08
July 2000 3.72 ND 2.14 ND 4.02
August 2000 3.71 ND 2.23 ND 4.00
September 2000 3.64 ND 2.27 ND 3.98
October 2000 3.58 ND 2.33 ND 3.90
November 2000 3.55 ND 2.32 ND 3.85
December 2000 3.46 ND 2.21 ND 3.76
January 2001 3.37 ND 2.22 ND 3.54
February 2001 3.37 ND 2.21 ND 3.43
March 2001 3.45 ND 2.27 ND 3.32
April 2001 3.59 ND 2.54 ND 3.35
May 2001 3.59 ND 2.57 ND 3.28
June 2001 3.55 ND 2.57 ND 3.30
July 2001 3.61 ND 2.58 ND 3.43
August 2001 3.67 ND 2.39 ND 3.35
September 2001 3.67 ND 2.50 ND 3.21
October 2001 3.67 ND 2.57 ND 3.15
November 2001 3.64 ND 2.39 ND 3.22
December 2001 3.76 ND 2.52 ND 3.54
January 2002 3.75 ND 2.49 ND 3.45
February 2002 3.75 ND 2.47 ND 3.33
March 2002 3.75 ND 2.51 ND 3.37
April 2002 3.66 ND 2.42 ND 3.18
May 2002 3.58 ND 2.42 ND 3.13
June 2002 3.46 ND 2.32 ND 3.10
July 2002 3.43 ND 2.41 ND 2.93
August 2002 3.42 ND 2.31 ND 2.55
September 2002 3.31 ND 2.18 ND 2.30
October 2002 3.34 ND 2.39 ND 2.44
November 2002 3.39 ND 2.39 ND 2.48
December 2002 3.32 ND 2.31 ND 2.46
January 2003 3.20 ND 2.08 ND 2.32
February 2003 3.08 ND 1.79 ND 2.03
March 2003 2.92 ND 1.84 ND 1.99
April 2003 3.03 ND 1.94 ND 2.21
May 2003 2.98 ND 1.80 ND 1.94
June 2003 2.89 ND 1.65 ND 1.75
July 2003 3.09 ND 1.83 ND 2.12
August 2003 3.12 ND 1.95 ND 2.32
September 2003 3.03 ND 2.04 ND 2.19
October 2003 2.97 ND 2.15 ND 2.07
November 2003 2.91 ND 2.21 ND 1.97
December 2003 2.79 ND 2.03 ND 1.99
January 2004 2.61 ND 1.94 ND 1.91
February 2004 2.52 ND 1.96 ND 1.79
March 2004 2.36 ND 1.81 ND 1.49
April 2004 2.38 ND 1.93 1.13 1.92
May 2004 2.35 ND 2.05 1.08 2.13
June 2004 2.36 ND 2.10 1.14 2.16
July 2004 2.23 ND 2.07 1.02 2.04
August 2004 2.14 ND 2.04 0.71 1.88
September 2004 2.24 ND 1.97 0.69 1.82
October 2004 2.21 ND 1.89 0.61 1.76
November 2004 2.14 ND 1.87 0.58 1.68
December 2004 2.01 ND 1.76 0.58 1.65
January 2005 1.91 ND 1.75 0.55 1.72
February 2005 1.89 ND 1.77 0.57 1.63
March 2005 1.98 ND 1.87 0.59 1.77
April 2005 1.83 ND 1.76 0.38 1.69
May 2005 1.73 ND 1.70 0.34 1.65
June 2005 1.70 ND 1.65 0.56 1.67
July 2005 1.76 ND 1.65 0.73 1.88
August 2005 1.69 ND 1.61 0.90 1.89
September 2005 1.53 ND 1.51 0.83 1.70
October 2005 1.50 ND 1.57 0.85 1.94
November 2005 1.53 ND 1.54 0.88 2.09
December 2005 1.54 ND 1.47 0.88 2.15
January 2006 1.47 ND 1.29 0.68 2.03
February 2006 1.48 ND 1.32 0.75 2.06
March 2006 1.56 1.59 1.41 0.80 2.21
April 2006 1.69 1.83 1.54 0.94 2.41
May 2006 1.68 1.82 1.63 0.96 2.45
June 2006 1.79 1.87 1.68 1.00 2.54
July 2006 1.80 1.87 1.65 1.07 2.52
August 2006 1.64 1.75 1.55 1.02 2.32
September 2006 1.65 1.69 1.49 1.05 2.35
October 2006 1.75 1.73 1.57 1.15 2.43
November 2006 1.69 1.63 1.48 1.14 2.30
December 2006 1.67 1.72 1.57 1.12 2.27
January 2007 1.80 1.95 1.78 1.20 2.45
February 2007 1.81 1.98 1.80 1.25 2.38
March 2007 1.75 1.88 1.70 1.18 2.20
April 2007 1.75 2.05 1.91 1.18 2.28
May 2007 1.88 2.17 2.05 1.14 2.39
June 2007 2.14 2.45 2.21 1.26 2.69
July 2007 2.18 2.41 2.19 1.32 2.66
August 2007 2.14 2.23 1.97 1.21 2.48
September 2007 2.12 2.11 1.79 1.18 2.29
October 2007 2.10 2.11 1.75 1.24 2.23
November 2007 2.08 1.84 1.48 1.09 1.83
December 2007 2.02 2.00 1.50 1.13 1.87
January 2008 1.94 1.81 1.30 1.01 1.53
February 2008 2.01 1.70 1.33 1.11 1.47
March 2008 1.72 1.47 1.02 1.14 1.20
April 2008 1.75 1.72 1.20 1.21 1.42
May 2008 1.64 1.86 1.36 1.31 1.53
June 2008 1.46 2.10 1.36 1.28 1.70
July 2008 1.40 2.02 1.29 1.11 1.60
August 2008 1.45 1.93 1.19 1.18 1.75
September 2008 1.75 1.97 1.25 1.50 1.92
October 2008 2.35 2.41 2.06 2.86 2.90
November 2008 2.63 2.54 2.58 3.23 3.40
December 2008 2.47 1.69 2.20 3.93 2.61
January 2009 2.36 1.46 1.53 2.96 2.26
February 2009 2.27 1.64 1.24 3.53 2.09
March 2009 2.16 1.49 1.19 3.65 2.02
April 2009 1.99 1.34 1.08 3.14 1.78
May 2009 2.02 1.29 1.09 3.27 1.92
June 2009 1.73 1.55 1.08 3.31 2.05
July 2009 1.73 1.64 1.23 2.62 1.96
August 2009 1.62 1.51 1.16 2.57 1.90
September 2009 1.65 1.44 1.06 2.26 1.73
October 2009 1.62 1.37 0.70 2.20 1.57
November 2009 1.55 1.42 0.77 2.10 1.36
December 2009 1.39 1.33 0.80 1.91 1.45
January 2010 1.35 1.40 0.82 1.61 1.44
February 2010 1.35 1.41 0.96 1.56 1.48
March 2010 1.34 1.30 0.83 1.61 1.57
April 2010 1.30 1.18 0.71 1.39 1.54
May 2010 1.26 0.96 0.73 1.40 1.32
June 2010 1.30 0.97 0.76 1.63 1.30
July 2010 1.31 1.05 0.84 1.49 1.29
August 2010 1.14 0.83 0.65 1.37 1.06
September 2010 0.99 0.69 0.46 1.34 0.94
October 2010 0.82 0.68 0.38 1.18 0.60
November 2010 0.92 0.85 0.48 1.19 0.70
December 2010 0.99 1.08 0.68 1.21 1.09
January 2011 1.03 1.02 0.64 1.12 1.09
February 2011 1.21 1.10 0.68 1.04 1.24
March 2011 0.89 1.04 0.50 1.05 0.98
April 2011 0.74 0.97 0.53 0.78 0.91
May 2011 0.58 0.80 0.36 0.60 0.82
June 2011 0.73 0.85 0.20 0.47 0.79
July 2011 0.64 0.62 0.13 0.54 0.64
August 2011 0.32 0.31 -0.21 0.67 0.11
September 2011 0.28 0.26 -0.27 0.63 0.09
October 2011 0.25 0.21 -0.19 0.61 0.24
November 2011 0.09 0.20 -0.38 0.60 0.03
December 2011 -0.03 0.11 -0.53 0.53 0.00
January 2012 -0.10 -0.17 -0.64 0.41 -0.10
February 2012 -0.06 -0.14 -0.64 0.24 -0.25
March 2012 -0.04 -0.19 -0.59 0.11 -0.12
April 2012 -0.03 -0.44 -0.64 -0.22 -0.23
May 2012 -0.17 -0.47 -0.74 -0.51 -0.39
June 2012 -0.25 -0.31 -0.65 -0.48 -0.49
July 2012 -0.26 -0.50 -0.70 -0.43 -0.55
August 2012 -0.15 -0.61 -0.76 -0.40 -0.50
September 2012 -0.26 -0.57 -0.73 -0.53 -0.65
October 2012 -0.31 -0.58 -0.65 -0.64 -0.72
November 2012 -0.34 -0.61 -0.69 -0.69 -0.73
December 2012 -0.32 -0.66 -0.79 -0.72 -0.73
January 2013 -0.18 -0.56 -0.89 -0.83 -0.60
February 2013 -0.14 -0.58 -1.08 -1.07 -0.57

Note: Par yields. The maturity for the U.S., U.K., and German bonds is 10 years. The current maturity for the Japanese bond is 5 years, and that for the Canadian bond is 8 years.

Source: Bloomberg.

ND No data.

 

Chart 4. Alternative 10-Year Treasury Yield Forecasts

Percent, annual average

  2013 2014 2015 2016 2017
December BCFF consensus 2.0 2.6 3.4 4.2 4.7
Congressional Budget Office 2.1 2.7 3.5 4.3 5.0
Survey of Professional Forecasters 2.1 2.6 3.3 3.8 ND
Term structure model 2.2 2.7 3.2 3.7 4.2

Note: The term structure model forecast assumes that the expected real rate and term premium components of the 10-year nominal yield as shown in chart 2 revert to their respective pre-crisis means over a 5-year period while the expected inflation component remains constant at the level at the end of 2012.

Source: For December BCFF consensus, Blue Chip Financial Forecasts (BCFF) survey, December 2012; for Congressional Budget Office, Congressional Budget Office (2013), The Budget and Economic Outlook: Fiscal Years 2013 to 2023 (Washington: CBO), February 5; for Survey of Professional Forecasters, Survey of Professional Forecasters for 2013:Q1.

ND No data.

 

Chart 5. Measures of Uncertainty around 10-Year Rate Forecasts (Centered around Respective Means)

Percentage points

Measure 2013 2014 2015 2016 2017
BCFF: Spread between top 10 (average) and bottom 10 (average)
Above mean 0.43 0.60 0.80 0.90 0.90
Below mean -0.60 -0.50 -0.40 -0.60 -0.80
70 percent confidence interval from FRB/US
Above mean 0.80 1.20 1.60 1.50 1.50
Below mean -0.33 -0.60 -0.70 -0.80 -1.00
Swaption-implied 70 percent confidence interval
Above mean 0.43 0.94 1.30 1.58 1.78
Below mean -0.43 -0.95 -1.34 -1.68 -1.97

Note: In the chart, each range or confidence interval is reported as a deviation from the mean path under the corresponding method. The Blue Chip Financial Forecasts (BCFF) measure uses the spread between the average of the highest 10 individual forecasts and that of the lowest 10 individual forecasts. The confidence intervals from FRB/US are based on stochastic simulations of the FRB/US model with shocks drawn randomly from the set of model equation residuals over the period from 1969 to 2011. The swaption-based measure is derived from the term structure of swaptions on 10-year swap rates.

Source: For BCFF measure, Blue Chip Financial Forecasts survey, December 2012; for FRB/US measure, Federal Reserve Board, FRB/US model; for swaption-implied measure, J.P. Morgan and staff calculations.

Last update: August 2, 2013