How and when such theoretical uncertainty will translate into actual market movements will depend on market dynamics. Because of extreme monetary ease, short-term interest rates have been close to zero for some time and markets expect policy rates to remain low. The yield curve is quite steep yet long-term interest rates are very low by historical standards. Graph 4 shows that the US dollar term spread has been around 250–350 basis points since mid-2009. The pricing of interest rate derivatives products suggest a high carry-to-risk ratio for those with long positions (the lower panel of Graph 4). This interest rate.
