less risky. through this channel, the decline in inflation volatility should be reflected in a smaller inflation risk premium in nominal bond yields, which is exactly gurkaynak and wright ( 2012 ) provide a survey. for estimates of term premiums in other countries, see cohen, hordahl, and xia ( 2018 ), and international monetary fund ( 2018 ). - 7what is estimated in the kim, walsh, and wei ( 2019 ) yield curve model ( figure 4, “ term premium decomposition ” ). indeed, this yield curve model attributes around 100 basis points of the decline in the u. s. 10 - year nominal term premium since the early 1990s to a decline in the inflation risk premium. a second likely contributor to the decline in the u. s. term premium over the past decade is the federal reserve ’ s substantial purchases of long - duration treasury securities and mortgage - backed securities in three large - scale asset purchase ( lsap ) programs and one maturity extension program between late 2008 and late 2014. these purchases, which were concentrated at the longer end of the u. s. yield curve, took duration out of the market and thus lowered the equilibrium yield required by investors to hold the reduced supply of long - duration assets instead of holding and rolling over short - maturity treasury bills. estimates of the cumulative effect of these purchases on the u. s. term premium span a wide range, with some estimates above 100 basis points. 10 moreover, the global market for sovereign bonds and currency - hedged duration is tightly integrated, and it seems likely that asset purchase programs in other major economies, such as japan, the euro area, and the united kingdom, have contributed as well to reducing the term premium in treasury securities ( and, of course, lsap programs in the united states likely contributed to lower term premiums abroad ). a third contributor to a lower u. s. term premium is much less widely appreciated than lower inflation volatility and lsaps. this reflects the value that bonds have provided over the past 20 years as a hedge against equity risk. as documented by campbell, sunderam, and viceira ( csv ) ( 2017 ) and campbell, pflueger, and viceira for recent reviews, see kuttner ( 2018 ) and gagnon ( 2016 ). hamilton and wu ( 2012 ) and li and wei ( 2013 ), among others, study the effects of the fed ’ s asset purchases in a

that is during may, june and the first half of july 1998, they reduced their holdings again by r12 billion. both the inflows and the outflows of capital on this occasion disrupted the south african financial markets and complicated the implementation of monetary policy centred on the medium - term objective of maintaining financial stability in the interest of optimum economic growth. in the situation and against the background of a rather depressed domestic economy, the yield on long - term government bonds increased from 12. 7 per cent on 30 april 1998, to 16. 4 per cent on 6 july, before it declined again to 15. 5 per cent last week. the reserve bank ’ s fluctuating repo rate similarly showed wide fluctuations and increased from 14. 8 per cent in early may to a peak of 24. 0 per cent on 22 june, before settling down at a level of about 21 per cent. all banking institutions in the country were forced to raise their deposit and lending rates by about 6 percentage points since the end of april. the prime overdraft rate of the major commercial banks now stands at 24 per cent. with the latest measure of inflation at only 5 per cent per annum, real interest rates are at an extremely high level. the exchange rate of the rand also came under a lot of pressure. after being relatively stable for a period of about 18 months from october 1996 up to the end of april 1998, the rand depreciated from r5. 05 against the us dollar in the middle of may to r6. 62 = $ 1 on 6 july 1998. since then, the exchange rate appreciated again to fluctuate around the r6. 00 = $ 1 level for the last few days. at this level, the rand, measured against a basket of currencies, is still about 18 per cent down from where it was at the beginning of this year. some critics do believe that the removal of the exchange controls is partly to be blamed for this greater volatility in financial conditions. they advise south africa, therefore, to reintroduce some of the controls, for example, the two - tier exchange rate system. this view is not shared by the monetary authorities in south africa. despite the gyrations of recent weeks, we still believe that the advantages of participation in the financial globalisation process will, over time, bring more advantages to the south african economy than disadvantages. 7. concluding remarks the policies of the phasing out of exchange