Reading the Sovereign Yield Curve: What the Shape of Government Bond Markets Reveals About Monetary Policy and Economic Expectations

The sovereign yield curve is often treated as a compact forecast of future growth, inflation and monetary policy. That interpretation is useful, but incomplete. Government bond yields combine expectations about future short-term rates with term premia, liquidity conditions, supply and demand, institutional constraints, fiscal risk and market structure. This working paper develops a practical framework for reading sovereign yield curves without reducing every movement to a single macroeconomic narrative. It separates level, slope and curvature, distinguishes expectations from risk compensation, examines the role of central banks and debt-management policy, and explains why cross-country comparisons require institutional context. The central conclusion is that a yield curve is best understood as a market-clearing price system shaped by both macroeconomic beliefs and the balance-sheet architecture through which those beliefs are expressed. Published as part of the BondStats Working Papers series by BondStats Ltd. Research platform: https://www.bondstats.org/