Due not least to soaring oil prices, prices and interest rates are rising around the globe. Nonetheless, long-term bond yields remain low. Will the rise in interest rates continue and what are the possible explanations?

Interest rates are among the most difficult factors to forecast on the financial markets. Setting short-term fluctuations aside (within a single month, for example) and concentrating on trend interest rates, macroeconomic variables become increasingly important. But which of these are key to the rate trend? Which determinants tend to play a less important or temporary part?

On October 11, the Royal Swedish Academy of Sciences announced this year’s winners of the “Nobel Prize for Economic Sciences”: Finn E. Kydland and Edward C. Prescott. Their academic papers have not only had an impact on the thinking of many economists and monetary policymakers. Indeed, there is much to suggest that traces of their work can even be seen in capital market trends.