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This paper investigates international co-movement in bond yields by testing for uncovered interest parity (UIP). Existing work is supplemented by focusing on long instead of short-term interest rates and by employing exchange rate expectations derived from purchasing power parity (PPP) instead of actual outcomes. Among the major currencies during 1975-97, the paper does not find a further increase in co-movement beyond that associated with the wave of financial market liberalization in the early 1980s. Given the similarity between PPP-based UIP tests and those employing actual exchange rate outcomes, the value added of the former lies mainly with data availability.

Banks and Banking --- Foreign Exchange --- Investments: General --- Interest Rates: Determination, Term Structure, and Effects --- Financial Markets and the Macroeconomy --- Investment --- Capital --- Intangible Capital --- Capacity --- Finance --- Currency --- Foreign exchange --- Macroeconomics --- Long term interest rates --- Exchange rates --- Yield curve --- Interest rate parity --- Return on investment --- Financial services --- National accounts --- Interest rates --- Saving and investment --- United States