Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

No, they really don’t. The three-factor term structure model doesn’t provide a breakdown; it doesn’t allow us to distinguish between changes in risk perceptions and risk appetite. So there’s no evidence from that score. You may be seeing some reflection of what’s shown in the bottom left-hand panel with that pronounced downward skew to interest rates. If investors believe that bonds could prove to be a particularly good investment, given the possibility of economic weakness, they may actually demand a lower term premium because of the covariances that you referenced. But I think we need to do more work on that before we push hard on that analysis.

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