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Term premia dynamics in the US and Euro Area: who is leading whom?
This article examines the dynamic relationship between term premia in euro area and US government bond yields. The term premia are extracted using an affine term structure model using daily data on zero-coupon bond yields. The results show strong co-movement between changes in the premia, especially at the long end of the yield curves. A further investigation of the causal relationship between the euro area and US term premia reveals that only a small fraction of the co-movements can be attributed to one region driving the other.