Chart No. 203
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What the term premium is trying to tell you.
For years investors paid to own long bonds. Now they want to be paid for it. The term premium is the cleanest read on that change of mood.
Tomás Ferreira
Contributor
Illustrative data based on public sources.
ACM term premium · UST 10Y
The term premium is the extra yield investors ask for to own a 10-year bond instead of rolling 3-month bills for ten years. For most of the 2010s it was negative. It is now 0.74%.
Why it was negative
Central banks were buying long bonds, inflation was predictable, and long bonds rose when stocks fell. Investors paid for that insurance.
Why it turned
All three reasons reversed. Central banks are selling, inflation became harder to forecast, and in 2022 bonds and stocks fell together. A positive term premium is not a crisis; it is the market putting a price on uncertainty again.
Not investment advice. Carry writes about markets; it does not tell you what to buy or sell. Charts use illustrative data unless a source says otherwise.
