BlockBeats report, October 9: U.S. long-term Treasury yields continue to rise, with market focus shifting from the Fed’s interest rate path to the term premium. The New York Fed’s model shows that the term premium on the 10-year U.S. Treasury has risen by approximately 40 basis points since mid-September to around 0.98%, reaching its highest level since 2014; during the same period, the 10-year Treasury yield increased by about 30 basis points. Another model incorporating economists’ interest rate forecasts indicates that the term premium has climbed to 1.08%, the highest level since 2010.
The term premium reflects the additional return investors demand for bearing uncertainties such as long-term inflation, fiscal risks, bond supply, and market liquidity. Analysts note that the recent rise in long-term yields may no longer be driven solely by expectations of Federal Reserve policy, but rather by investors requiring higher risk compensation for holding long-term U.S. Treasuries.
The U.S. annual fiscal deficit is approximately $2 trillion, with the government continuously issuing sovereign debt; meanwhile, AI infrastructure development is driving tech giants to increase debt financing. According to Reuters data, Alphabet, Amazon, Meta, Microsoft, and Oracle have issued approximately $220 billion in debt this year, more than double the level from the same period last year. The simultaneous competition between the government and corporations for long-term capital may further drive up financing costs.
If the term premium continues to rise, long-term U.S. Treasury yields may not decline significantly even if the Federal Reserve pauses rate hikes or lowers its future rate expectations, thereby maintaining persistent pressure on mortgages, corporate loans, and economic activity. Analysts believe that fiscal expansion, increased debt supply, and geopolitical uncertainty may signal a structural shift away from the environment of persistently low long-term interest rates seen over the past decade.