Long-term interest rates volatility linked to term premiums range variability.
The article explores how term premiums affect long-term interest rates. It shows that term premiums must vary within a certain range to explain the volatility of long-term bond yields. The study also suggests that if term premiums change over time, they can help explain why long-term bond yields fluctuate more than expected. Additionally, the research considers transaction costs and suggests that excessive volatility in bond yields doesn't necessarily mean there are easy profit opportunities available.