International Yield Co-movements

102 Pages Posted: 19 Jun 2019 Last revised: 29 Jun 2021

See all articles by Geert Bekaert

Geert Bekaert

Columbia Business School - Finance and Economics

Andrey Ermolov

Fordham University - Gabelli School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: June 4, 2021


We decompose long-term nominal bond yields into real and inflation components in an international context using inflation-linked and nominal bonds. In contrast to extant results, real rate variation dominates the variation in inflation-linked and nominal yields. 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. Our results are robust to various alternative measurements of inflation expectations and the liquidity premium. They continue to hold when a no-arbitrage term structure model with real, nominal, and inflation factors is used to effect the yield decomposition.

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

JEL Classification: E31, E43, G12, G15

Suggested Citation

Bekaert, Geert and Ermolov, Andrey, International Yield Co-movements (June 4, 2021). Columbia Business School Research Paper Forthcoming, Proceedings of Paris December 2020 Finance Meeting EUROFIDAI - ESSEC, 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)


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