International Yield Co-movements

101 Pages Posted: 19 Jun 2019 Last revised: 21 Oct 2020

See all articles by Geert Bekaert

Geert Bekaert

Columbia Business School - Finance and Economics

Andrey Ermolov

Fordham University - Gabelli School of Business

Date Written: August 27, 2020


We decompose 5 year nominal bond yields into real and inflation components in an international context using inflation-linked and nominal bonds. Real rate variation dominates the variation in inflation-linked and nominal yields, but liquidity and inflation risk premiums are also important. Cross-country nominal and inflation-linked yield correlations have declined since the Great Recession. Real rates are the main source of the correlation between nominal yields. A slow-moving risk aversion variable from a habit model explains a substantive part of the variation in real yields and cross-country yield correlations, but a measure of the monetary policy stance improves the model fit.

Keywords: sovereign bonds, cross-country co-movement, real yield, expected inflation, inflation risk premium, liquidity premium, habit formation, inflation-linked bonds

JEL Classification: E31, E43, G12, G15

Suggested Citation

Bekaert, Geert and Ermolov, Andrey, International Yield Co-movements (August 27, 2020). Columbia Business School Research Paper Forthcoming, Available at SSRN: or

Geert Bekaert

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Andrey Ermolov (Contact Author)

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
Bronx, NY 10458
United States
9179690060 (Phone)


Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics