The recent surge in long-term U.S. Treasury yields has been associated with a sharp rise in the term premium. This “unknowable number” is the residual yield after accounting for anticipated path of short-term interest rates over time. A higher term premium reflects greater uncertainty about this path, owing to things like revised expectations for Treasury bond supply or future inflation. The WSJ further notes that the term premium suggests a range of potential implications of investor sentiment on the economy and U.S. debt, and which may impact the Federal Reserve’s actions on raising interest rates.
Term Premiums May be Driving-Up Treasury Yields, According to WSJ
Published on October 20, 2023
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