As prudential regulation has been strengthened, the funds have purchased additional long-dated assets to maturity match their long-dated pension liabilities. One way of seeing the effect of these various purchases is the term premium (Graph 12).
Normally, when an investor purchases a 10-year security, a risk premium is earned over and above the return that is expected from rolling a short-term investment for 10 years. This premium, which historically has averaged around 1½ per cent, is now negative at around minus 1 per cent. This is directly related to purchases of government securities by central banks and others.