In addition, term premiums on long-term U.S. Treasury securities are estimated to have declined substantially since the late 1980s. 4 Moreover, this  4  Kim, Don H. and Jonathan H. Wright (2005), “An Arbitrage-Free Three-Factor Term Structure Model and the Recent Behavior of Long-Term Yields and Distant-Horizon Forward Rates,” FEDS 2005-33.
BIS Review 21/2007  3  decline is significantly associated with a reduction in uncertainty about long-run inflation and about short-term interest rates. 5 Third, liquidity in U.S. markets also increased significantly in recent years due to increased international capital flows.