Munich Personal RePEc Archive

Term premium estimation for South Africa

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

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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.

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