Expected real yields on nominally risk-free bonds and expected consump
tion growth at horizons from one-quarter to two years are identified u
sing time series models, and their basic propel-ties are examined. The
principal results are: (1) real yields and consumption growth are (we
akly) negatively correlated over the full sample period of 1953-1991;
(2) excluding the 1979-1985 sub-period, real yields and consumption gr
owth are (strongly) positively correlated; (3) the cyclical properties
of real yields and consumption growth are qualitatively similar in th
e pre-1979 data, and they are consistent with a simple real business c
ycle model.