We develop a segmented markets model which rationalizes the effects of monetary policy on the term structure of interest rates. When arbitrageurs' portfolio features positive duration, an unexpected rise in the short rate lowers their wealth and raises term premia. A calibration to the U.S....

We study the transmission of monetary policy through risk premia in a heterogeneous agent New Keynesian environment. Heterogeneity in households' marginal propensity to take risk (MPR) summarizes differences in portfolio choice on the margin. An unexpected reduction in the nominal interest rate...