Purchase - $5.00 NBER Subscribers Download

Are Interest Rates Really Low?

39 Pages Posted: 29 Jan 2018  

Daniel R. Feenberg

National Bureau of Economic Research (NBER)

Clinton Tepper

University of California, Los Angeles (UCLA) - Anderson School of Management

Ivo Welch

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2018

Abstract

Contrary to common perception, many fixed-income investors have not suffered unusually low real interest rates in and after the Great Recession of 2008. This is because taxable investors must first pay taxes on nominal interest returns, before inflation further reduces their earned real interest rates. To obtain the same real after-tax yield, investors need more than one-to-one compensation for inflation. As a result, long-term Treasury bonds have been no less attractive for taxable investors in 2016 (with a 1.0% post-tax real yield) than they were in 2006 (0.5%), 1976 (–1.7%), 1966 (0.9%), and 1956 (0.8%), although they have been less attractive than they were in 1996 (2.4%) and 1986 (2.9%). Short-term Treasury bond yields have been on the low side but have also not been particularly unusual.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Feenberg, Daniel R. and Tepper, Clinton and Welch, Ivo, Are Interest Rates Really Low? (January 2018). NBER Working Paper No. w24258. Available at SSRN: https://ssrn.com/abstract=3112045

Daniel R. Feenberg (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-0343 (Phone)

Clinton Tepper

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Ivo Welch

University of California, Los Angeles (UCLA) ( email )

110 Westwood Plaza
C519
Los Angeles, CA 90095-1481
United States
310-825-2508 (Phone)

HOME PAGE: http://www.ivo-welch.info

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paper statistics

Downloads
9
Abstract Views
211
PlumX