Research Briefing | Sep 29, 2023

Why the real yield on private wealth will keep falling globally

Despite the importance of returns on private wealth for long-term investors – be they households, asset managers, or pension funds – the fact that real yields have been on a downward trend across the world for decades seems to have escaped attention.

What you will learn:

  • This trend has important implications for monetary policy and asset allocation. The long-run slide in yields goes hand-in-hand with the rise in private wealth: as wealth rises, yields fall.
  • The gap between private wealth yields and real government bond yields has widened substantially in recent decades. This may have weakened the link between policy and private sector rates, making the monetary policy transmission channel less effective, which may help explain why inflation seems to have responded more sluggishly to policy rate hikes recently.
  • Our yield forecast is driven by population ageing and the empirical fact that elderly households hold more wealth. While this sets aside many factors that are more difficult to model, our results are based on a recent, dynamic methodology that robustly captures the key interactions between real yields, household wealth accumulation, and asset supply by firms.
Back to Resource Hub

Related Posts

M Asia leads the pack with highest convergence potential

Post

EM Asia leads the pack with highest convergence potential

Based on the middle-income trap literature, we developed a long-term growth indicator that used 33 metrics to assess risks to EM economies' long-term growth potential.

Find Out More
Japan currency

Post

BoJ to allow 10-year JGB yields to exceed 1%

The Bank of Japan (BoJ) left short- and long-term policy rates unchanged at -0.1% and around 0%, respectively, at the meeting on Oct.31. However, the BoJ decided to tweak the yield curve control (YCC) policy by setting the upper bound of 1% as a reference and by making its Japanese Government Bond (JGB) purchase operations more flexible not to rigidly defend the bound.

Find Out More

Post

Australian asset prices and geopolitical tensions pose key downside risks

The fight against inflation is well underway across the globe, with most central banks either approaching or having already reached the peak of their hiking cycle. Additionally, geo-political tensions and the possibility of increasing restrictions on trade between global rivals remains a key downside risk to the global outlook.

Find Out More