A bond market timing model.

The article focuses on the establishment of a relative valuation framework which is based on a market-implied excess risk premium measure relating long to short-term fixed-income security yields in the U.S. The normal risk premium associated with long and short-term bonds were characterized by specifying a probability distribution of interest rate outcomes. The dispersion of interest rate outcomes were integrated by applying a measure of actual interest rate volatility over a long period of time. It has been proven that there is a normal risk premium relating long to short-term bonds and that the risk premium is changing over time.