But crucially, once their policy objectives come closer to being achieved, central banks can safeguard low bond yields, if judged necessary, only to the extent they provide effective guidance on the future path of short-term interest rates. Asset purchases and rate forward guidance Let me start with the interaction between rate forward guidance and asset purchases.
A natural starting point for such a discussion is to recall the two main components that shape long-term interest rates: expectations of future short-term rates and a term premium. Asset purchase programmes can lower yields by influencing both components. Purchases compress 1 / 15  BIS central bankers' speeches  term premia by removing duration risk from the market.