US Treasury 10Y Term Premium Has Nosedived After Each Recession … And Getting Lower

The term premium is the excess yield that investors require to commit to holding a long-term bond instead of a series of shorter-term bonds. But the problem with constant intervention by The Federal Reserve  is that the 10-year Term Premium has been falling since 1984.

10ytermprem

Notice that the decay in the term premium following each recession gets lower and lower. When it is now negative and has been that way since March 2017.

Here is the 10-year decomposition.

10ydecomp

 

One thought on “US Treasury 10Y Term Premium Has Nosedived After Each Recession … And Getting Lower

  1. It is a feature, not a bug.
    Our insane credit/debt-money system requires it.
    If term premia ever returned to normal, historical levels, the whole system would implode into a deflationary black hole.

    Like

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