Macro-financial risk
2026-04-26
11 minute read
18 sources
The term premium returns: bear steepener risk in US Treasuries through 2026
After a decade in negative territory, the New York Fed ACM term premium turned positive in late 2023 and has stayed there. With quantitative tightening still draining duration, the bills share above the TBAC band, and net interest costs on track to surpass Medicare, the long end is again a price taker on supply. We decompose the 10 year yield, size the risks, and lay out the bear steepener playbook.
The 10 year nominal Treasury yield decomposes into expected real short rates, expected inflation, and the term premium. From 2017 through 2022, the New York Fed ACM term premium model printed deeply negative readings, bottoming near minus 150 basis points in March 2020. Beginning in late 2023 the premium turned positive and reached roughl...