As I described in subsequent remarks (Bernanke, 2006), term premiums also declined during this period for reasons that are debated but may have included a perceived reduction in uncertainty regarding inflation and the real economy as well as increased demand for longer-term securities by various institutional investors, including pension funds and foreign central banks.
Changes in the global pattern of saving and investment surely played an important role in the decline in long-term rates, however. Recent developments I turn now to a review of developments since I last spoke on these issues two and a half years ago. In brief, external imbalances have become wider since 2004.