This paper develops and estimates an equilibrium model of the term structures of nominal and real interest rates. The term structures are driven by state variables that include the short term real interest rate, expected inflation, a factor that models the changing level to which inflation is...

Shocks to nominal bond yields are comprised of news about expected future inflation, news about expected future real short rates, and news about expected excess returns — all over the life of the bond. I estimate the magnitude of the first component for short and long maturity Treasury bonds....