Higher long-term real yields in UK linked to positive economic forecasts.
The UK government issues different types of long-term bonds to measure expected inflation rates. Higher real yields are linked to forecasts of higher income, tighter monetary policy, and positive supply shocks. Short-term changes in the monetary base don't affect long-term real rates. Expected inflation rates don't impact long-term real rates either. The choice of proxy for expected long-term inflation greatly influences the conclusions drawn from the data.