Term premium estimation for South Africa

Steenkamp, Daan and Erasmus, Ruan (2022): Term premium estimation for South Africa.

Abstract

This white paper decomposes sovereign yields into expectations of future average short term rates and a term premium. We estimate that the term premium in South African sovereign bonds is lower than after the onset of the COVID pandemic, but still meaningfully higher than its historical average. Codera uses these estimates to extract market expectations of monetary policy and signals relating to the inflation and economic growth outlook, as well as produce estimates of market perceptions of liquidity premia and sovereign credit risk.

• Item Type: MPRA Paper
• Language: English
• Keywords: term premium
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates

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