Abstract
The expectations hypothesis of the term structure implies that interest rates of different maturities are driven by one common stochastic trend. Using the Johansen multivariate cointegration analysis one finds that for seven German bond yields at least two common stochastic trends exist. These trends may be interpreted as capturing a level and a slope effect. The results are equivalent to the fact that six spreads contain five independent cointegration vectors. For this situation an error correction model is quite well supported by the data.
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