// definition
Term premium
Compensation for holding duration
Short definition
The gap between a long bond's yield and the expected return from rolling short-term investments over the same horizon. This compensation for interest-rate risk is estimated with models such as ACM and Kim–Wright, whose results can differ and be revised. It can be negative when investors value the bond's hedging properties. The yield-curve slope does not measure it directly.
risk atlas
Knowledge map
Intuition
A model splits a long yield into the expected path of short rates and compensation for duration risk. That split is an estimate, with uncertainty.
Formula
long yield ≈ average expected short rates + term premiumWhy it matters now
When long-debt supply grows, QT removes the public buyer and foreign demand shifts, an expected fall in short rates can coexist with a rising long yield.
Related analyses
- Government debt: the price of getting out
- The world rediscovers the price of money
- Can a Fed hike lower long-term yields?Expectations, the term premium and Treasury buybacks.
- The price of time in French debtMaturity, initial borrowing costs and debt refinancing.
- The return of the term premiumDecomposing the long rate and the US debt regime.
- The Treasury basis tradeLeverage, repo and bond-market fragility.
- Repo, the liquidity factoryFunding chains that transmit a rate shock.
Related guides
- Reading the Treasuries marketCurve, auctions, holders and the term premium.
- Reading TIC dataForeign holdings and the custody bias.
- Net liquidity: TGA, RRPReserve channels and Treasury cash.
- Reading the CBO outlookFiscal trajectory and the interest bill.
Related datasets
- risk.jsonPublic snapshot of the risk signals.
- debt-risk.jsonDebt Risk Radar snapshot with provenance.
- risk-diff.json1, 7 and 30-day diff of signals, sources and models.
- signals/history.jsonPoint-in-time history of the signals.
Signals using it
- MethodologyDebt, interest burden, current stress and structural vulnerability.
- Risk DiffRecent change in risk and source freshness.
- Black Box RecorderHashed frames to replay a point-in-time state.
Primary sources
- Federal Reserve, Kim–Wright modelMethodology, limitations and revisions to term-premium estimates.
- Federal Reserve & FREDRates, the Fed balance sheet, FRED series and the New York Fed ACM model.
- U.S. Treasury Fiscal DataDebt, Treasury cash, DTS and auctions.
- U.S. Treasury TICCross-border holdings and flows of Treasuries.
- Congress.gov, GovInfo & CBOBudget projections, texts and estimates.
- Bank for International SettlementsGlobal debt, banks and market fragilities.