{"version":"1.0","provider_name":"UNI FR","provider_url":"https:\/\/www.uni.lu\/fr","author_name":"UNI FR","author_url":"https:\/\/www.uni.lu\/fr","title":"Mind the (Convergence) Gap: Forward Rates Strike Back!","type":"rich","width":600,"height":338,"html":"<blockquote class=\"wp-embedded-content\" data-secret=\"13EjzqWevV\"><a href=\"https:\/\/www.uni.lu\/fr\/events\/mind-the-convergence-gap-forward-rates-strike-back\/\">Mind the (Convergence) Gap: Forward Rates Strike Back!<\/a><\/blockquote><iframe sandbox=\"allow-scripts\" security=\"restricted\" src=\"https:\/\/www.uni.lu\/fr\/events\/mind-the-convergence-gap-forward-rates-strike-back\/embed\/#?secret=13EjzqWevV\" width=\"600\" height=\"338\" title=\"\u00ab\u00a0Mind the (Convergence) Gap: Forward Rates Strike Back!\u00a0\u00bb &#8212; UNI FR\" data-secret=\"13EjzqWevV\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\" class=\"wp-embedded-content\"><\/iframe><script>\n\/*! This file is auto-generated *\/\n!function(c,d){\"use strict\";var e=!1,o=!1;if(d.querySelector)if(c.addEventListener)e=!0;if(c.wp=c.wp||{},c.wp.receiveEmbedMessage);else if(c.wp.receiveEmbedMessage=function(e){var t=e.data;if(!t);else if(!(t.secret||t.message||t.value));else if(\/[^a-zA-Z0-9]\/.test(t.secret));else{for(var r,s,a,i=d.querySelectorAll('iframe[data-secret=\"'+t.secret+'\"]'),n=d.querySelectorAll('blockquote[data-secret=\"'+t.secret+'\"]'),o=new RegExp(\"^https?:$\",\"i\"),l=0;l<n.length;l++)n[l].style.display=\"none\";for(l=0;l<i.length;l++)if(r=i[l],e.source!==r.contentWindow);else{if(r.removeAttribute(\"style\"),\"height\"===t.message){if(1e3<(s=parseInt(t.value,10)))s=1e3;else if(~~s<200)s=200;r.height=s}if(\"link\"===t.message)if(s=d.createElement(\"a\"),a=d.createElement(\"a\"),s.href=r.getAttribute(\"src\"),a.href=t.value,!o.test(a.protocol));else if(a.host===s.host)if(d.activeElement===r)c.top.location.href=t.value}}},e)c.addEventListener(\"message\",c.wp.receiveEmbedMessage,!1),d.addEventListener(\"DOMContentLoaded\",t,!1),c.addEventListener(\"load\",t,!1);function t(){if(o);else{o=!0;for(var e,t,r,s=-1!==navigator.appVersion.indexOf(\"MSIE 10\"),a=!!navigator.userAgent.match(\/Trident.*rv:11\\.\/),i=d.querySelectorAll(\"iframe.wp-embedded-content\"),n=0;n<i.length;n++){if(!(r=(t=i[n]).getAttribute(\"data-secret\")))r=Math.random().toString(36).substr(2,10),t.src+=\"#?secret=\"+r,t.setAttribute(\"data-secret\",r);if(s||a)(e=t.cloneNode(!0)).removeAttribute(\"security\"),t.parentNode.replaceChild(e,t);t.contentWindow.postMessage({message:\"ready\",secret:r},\"*\")}}}}(window,document);\n<\/script>\n","thumbnail_url":"https:\/\/www.uni.lu\/wp-content\/uploads\/sites\/11\/2026\/03\/03120045\/UNIV_SM-Profile_1600x1600px-scaled.jpg","thumbnail_width":2560,"thumbnail_height":2560,"description":"AbstractIf a variable other than forward rates predicts future bond excessreturns, it must also provide information on the future path ofyields. We show that the difference between the natural rate ofinterest and the current level of monetary policy stance, dubbedConvergence Gap (CG), forecasts changes in yields and helpsidentify whether forward rates reflect expectations of future yieldsor risk premia. Compared to a model with only forward rates,adding the CG significantly raises the R2 in the forecastingregression of bond excess returns and delivers bond risk premiathat are more countercyclical. The importance of CG remainsrobust out-of-sample, and in countries other than the U.S.Further, its inclusion brings significant economic gains in thecontext of dynamic conditional asset allocation. Overall, ourresults suggest that forward rates remain the predominantpredictors of bond risk premia once the effect of time-varyingexpected yield changes is properly controlled for."}