An international analysis of the trend five-year government bond rate

Employing an unobserved components stochastic volatility model, we estimate the trend 5-year government bond rate in Canada, Norway, Sweden, Switzerland, the United Kingdom and the United States. Our results suggest that the estimated trend rate has decreased substantially between 2000 and 2020 in all six countries. In Norway, Switzerland and the United Kingdom, the trend rate has increased non-negligibly since 2020; in Canada, Sweden and the United States, the trend rate has not been affected much by the increase in the actual 5-year government bond rate. At the end of the sample, none of the countries has a trend rate higher than 3%. The model hence suggests that the 5-year government bond rate will be fairly low in the medium-to-long run.