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Term Premium

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economy1 hour ago

US 10-Year Treasury Yields Stay Above 5% as Term Premium and Inflation Expectations Diverge

The 10-year US Treasury yield has remained above 5.00% since September 23, peaking at 5.31% on October 5. A Rabobank analysis suggests two distinct drivers: initial rises were linked to Federal Reserve policy expectations, while sustained levels above 5% are driven by higher term premiums and inflation expectations. Bond market volatility, measured by the MOVE index, is also contributing to the elevated yields.

via Forex Factory|
#bond-market-volatility#economy#federal-reserve
Yield moves signal growth optimism, not credibility concerns
economy1 month ago

Yield moves signal growth optimism, not credibility concerns

An FT opinion argues that the rise in long-dated US Treasuries does not indicate worries about debt sustainability or Fed credibility. Inflation expectations remain anchored near the 2% target, while the real rate and term premium stay largely stable; higher yields mainly reflect higher expected long-run overnight rates. Investors are pricing in faster potential growth from AI, deregulation and tax policy, which could improve the fiscal path as revenues grow faster than outlays. Tariff revenue has been volatile, but as refunds fade and growth accelerates, deficits should decline, with easing energy shocks helping to bring inflation and rates down. The piece supports liquidity provision and regular, shorter-term debt issuance to maintain market stability while deficits shrink.

via Financial Times|
#economy#growth-expectations#inflation-expectations