Definition
The extra yield investors demand to lock their money into a long-term bond instead of rolling over short-term ones.
The story
Over ten years, a lot can go wrong: inflation, heavy government borrowing, surprises from the Fed. The term premium is the compensation for that uncertainty. It can't be seen directly; it's estimated with economic models, such as the one published by the New York Fed.
Why markets watch it
When long-term yields rise without a change in rate expectations, coverage often points to a rising term premium.
Connects to
Treasury yieldYield curveQuarterly refunding2-year vs. 10-year yield
We explain why it moves markets. What you do with it is your call. Commentary and education only. Not financial advice. All terms