Treasury Selloff Flashes Warning: Term Premium Breaks Decade High, Decoupling from Fed Path

Odaily News: U.S. long-term Treasury yields have recently climbed back to their highest levels in over two decades, but what Wall Street is truly wary of is not just whether the Federal Reserve will continue raising rates—it's an indicator that has rarely drawn attention from ordinary investors in the past: the term premium is rising rapidly.

According to the New York Fed's model, the term premium on 10-year U.S. Treasuries has risen by approximately 40 basis points since mid-September to around 0.98%, reaching its highest level since 2014. Over the same period, the 10-year Treasury yield rose by about 30 basis points. Another model that incorporates economists' forecasts for Fed rates shows the 10-year term premium has climbed to 1.08%, the highest since 2010.

Frank Rybinski, head of macro strategy at Aegon Asset Management, said that while different models produce varying results, all indicators currently point in the same direction—the term premium is rising, which means this round of long-end rate increases may prove more persistent than a rally driven purely by Fed policy expectations.