March 2025 (revised July 2026)
Focus
We highlight US monetary policy announcements as a major global factor contributing to the secular downward trend in long-term interest rates.
Contribution
We assess the domestic and cross-border spillover effects of monetary policy announcements on long-run trends in long-term interest rates across all major advanced economies.
Findings
We find that on average almost 70% of the secular decline in long-term interest rates across advanced economies between the early 1990s and 2023 occurred in the three days surrounding Federal Open Market Committee (FOMC) windows. By contrast, other central banks' announcements had only limited effects on the long-run direction of long-term interest rates, both domestically and across countries. The persistent global effect of the FOMC window reflects the combination of the concentration of declines in US bond yields and the close co-movement of global bond yields in this window.
Abstract
We document that yield changes during the three days around U.S. monetary policy announcements (FOMC windows) account for roughly 70% of the secular decline in long-term interest rates across the ten major (G10) currencies since the 1990s. In contrast, monetary policy announcements by other G10 central banks did not have any lasting effects on their own or other foreign long-term rates. Our analysis suggests that the secular decline in global long-term bond yields reflects the combination of large cumulative declines in U.S yields and the close comovement of global bond yields in the FOMC windows. We further document that FOMC windows are associated with a cumulative depreciation of the U.S. dollar against other global currencies. This depreciation is linked to declines in the U.S. Treasury convenience yield, despite stable global yield spreads relative to U.S. benchmarks.
