What Is Driving the Rise in Advanced Economy Bond Yields?

Global Financial Stability Notes, June 29, 2021

Source details

The nominal bond yields for advanced economies rose sharply during the first quarter of the year.
For the United States:
- The rise in inflation expectations is the primary driver of the rise in US nominal bond yields over the near term.
- The rise in real yields has been the major contributor to the rise in longer-term yields.
- The change in term premiums has also played a key role in driving both the longer-term inflation breakeven and real yields.
For other major advanced economies:
- Inflation expectations have risen across the board in the near term.
- Changes in real yields appear more pertinent as a driver for shifts in longer-term yields.

Jurisdictions covered: advanced economies (with particular investor focus on the United States).
Tenors analyzed: across the yield curve, distinguishing near-term (inflation expectations) and longer-term (real yields and term premiums).
Financial stability context: the rise in US nominal bond yields has had notable global financial stability spillovers.