This paper studies the predictability of bond risk premia by means of expectations to future business conditions using … excess bond returns and that the inclusion of expected business conditions in standard predictive regressions improve … forecast performance relative to models using information derived from the current term structure or macroeconomic variables …

I provide evidence that risks in macroeconomic fundamentals contain valuable information about bond risk premia. I … account for up to 31% of the variation in excess bond returns. The main predictor factors are associated with point … unemployment rate. In addition, factors provide information about bond risk premia variation that is largely unrelated to that …