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Price Pressures on UK Real Rates: An Empirical Investigation

95 Pages Posted: 13 May 2015 Last revised: 30 Jul 2015

Gabriele Zinna

Bank of Italy

Date Written: April 1, 2015


We assess the impact of institutional investors' demand for gilts on UK real rates by structurally estimating the model of Vayanos and Vila (2009). We therefore include those investors believed to display inelastic demand for gilts and preferences for longer-term maturities. The estimated model fits the term structure of real rates well, and strongly supports our choice of institutional investors. These investors' demand contributed to the decline in medium- to longer-term real rates by compressing bond risk premia. However, the price impact varied across investors and over time, and was only partly attenuated by increased supply.

Keywords: Institutional investors; term structure of real rates; price pressures; Bayesian estimation

JEL Classification: F34; G12; G15

Suggested Citation

Zinna, Gabriele, Price Pressures on UK Real Rates: An Empirical Investigation (April 1, 2015). Available at SSRN: or

Gabriele Zinna (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma


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