U.S. Treasury Term Premium Reaches Highest Level Since 2014

Long-term U.S. Treasury yields have risen to levels last seen more than 20 years ago, while the 10-year term premium has climbed sharply since mid-September, adding to pressure in the bond market.

The term premium reached about 0.98%, up roughly 40 basis points and its highest level since 2014. The 10-year Treasury yield rose about 30 basis points over the same period.

A separate model that incorporates economists’ forecasts for Federal Reserve interest rates placed the 10-year term premium at 1.08%, its highest level since 2010.

The figures show that the latest increase in long-term rates is not being driven solely by expectations about whether the Federal Reserve will continue raising interest rates. The move extends a rise in the term premium highlighted in an earlier Treasury market report.

Frank Rybinski, head of macro strategy at Aegon Asset Management, said different models produce different estimates, but they all point to a rising term premium. He said that could make the latest increase in long-term rates more persistent than a move driven only by expectations for Federal Reserve policy.