At the end of 2016 Q3, ten-year yields on inflation-linked bonds in the largest markets varied from –2 percent in the UK to 0 percent in the US. Yields on longer-term inflation-linked bonds are somewhat higher, but still considerably lower than their historical level. Chart: Driving forces behind the fall in the global real interest rate The reasons for the global fall in the real interest rate are complex. The fundamental driving forces are nevertheless reasonably well understood and are shown in the chart. The large current account surpluses of oil-exporting countries and emerging economies have been one important factor. In addition, population ageing and a more uneven distribution of income have driven up saving in many countries. At the same time, investment has been low in many 2/7  BIS central bankers' speeches  advanced economies. One reason for this could be prospects for low returns on investment in productive capital. Since the financial crisis, these structural factors have been amplified by cyclical conditions. While deleveraging has pulled up savings, greater uncertainty may have dampened the willingness to invest and increased the propensity to save. Unconventional monetary policies in many countries have also contributed to pushing down real bond yields. Moreover, the spread between the return on fixed income products with long and short maturities, the so-called term premium, has shown a marked decline in recent years. Historically, investors have been rewarded for providing loans with longer maturities – the term premium has been positive. This is not necessarily the case today.

An increasing number of countries have put in place or are developing solutions like these. Even in large economies with large payment volumes, round-the-clock settlement of all kinds of payments directly at the central banks is being facilitated. In 2018, the Eurosystem launched TARGET Instant Payment Settlement (TIPS). In autumn, the Federal Reserve announced that a similar system called FedNow! would be established for settlement of real-time payments in US dollars. Iceland already has a similar system The Riksbank is planning a transition to settlement of real-time payments directly at the central bank by linking to the European TIPS system. Settling real-time payments individually and directly at the central bank automatically eliminates the credit risk between system participants. The system is simplified because banks no longer need to take a detour via a clearing house. With fewer steps, the operational risk in the payment system may also be reduced. 2/5  BIS central bankers' speeches  The EU Payment Services Directive 2 (PSD2) was implemented in Norwegian law with effect from April 2019. One of the purposes of PSD2 is to facilitate greater competition and innovation. Similar regulations are being implemented elsewhere in the world and may help enable new entrants to gain a foothold in the payments market, whether they are global tech giants like Apple, Google and Facebook or smaller, more local operators. New services and service providers will require adjustments to underlying infrastructure and rules. Equal and transparent competitive terms are crucial.