How much should we read into shifts in long-dated yields?

Speech by Mr Hyun Song Shin, Economic Adviser and Head of Research of the BIS, at the US Monetary Policy Forum, New York City, 3 March 2017.

Very low yields on long-term government bonds may not necessarily signal prolonged future economic stagnation and deflation but instead reflect efforts by institutional investors to limit risk. This speech presents some findings from BIS research on the European government bond market which suggests that the very low long-dated yields in the middle of last year may have had as much to do with yield-chasing behaviour arising from short-term risk management practices of long-term investors than any far-sighted portfolio choices based on predictions about the distant future. The findings hold lessons for economic commentators and central banks, who closely monitor market indicators such as long-term bond yields for signals about the future direction of inflation and economic growth.