References
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The authors thank Xingmi Zhang for excellent research assistance. The note has also benefitted significantly from the comments from Nassira Abbas, Tobias Adrian, Fabio M Natalucci, and Mahvash Qureshi along with comments from internal reviewers and participants at an internal seminar.
The charts are refreshed as of the end of May 2021
The decomposition is updated as of mid April 2021, reflecting the peak levels
The decomposition is updated as of mid April 2021, reflecting the peak levels
The nominal yield decomposition (1) can also be rearranged to be expressed as the sum of average expected short-term nominal yield and the nominal-term premium. The IRP discussed in Section 2 is a function of the wedge between nominal and real-term premiums (see Abrahams et al. for more details).