Since that time, inflation-indexed yields have declined steadily and now stand below zero in each country.7 Apparently, low longer-term real rate expectations are playing an important role in accounting for low 10-year nominal rates in other industrial countries, as well as in the United States.
The third and final component of the long-term interest rate is the term premium, defined as the residual component not captured by expected real short-term rates or expected inflation. As I noted, the largest portion of the downward move in long-term rates since 2010 appears to be due to a fall in the term premium, so it deserves some special discussion.