Treasury term premium
Updated
What it is
This is a standard bond-market indicator published by the New York Fed using the Adrian-Crump-Moench (ACM) model, which decomposes the 10-year Treasury yield into (1) the market's expected path of future short-term rates and (2) the term premium — extra compensation investors demand for holding longer-dated debt rather than rolling over short-term instruments. A rising term premium signals investors want more compensation for duration risk, while a falling or negative premium suggests confidence that rates will stay low for longer.
Why it matters lately
The NY Fed's ACM-estimated 10-year term premium rose from negative territory in prior years to around +0.7 to +0.8 percentage points by mid-2026, though Apollo's chief economist noted on September 2, 2026 that it had moved roughly sideways over the preceding 12 months, with the Fed's pivot from expected cuts toward hikes doing more to explain rising yields than the term premium itself. The 10-year Treasury yield surged above 5%, its highest level since 2007, during the September 2026 bond selloff that followed the Fed's September 16 hike.
Asymmetric Analytics view
Inference (AA): AA likely flags the tension between a record-high yield and a comparatively flat term premium as a signal that rate-path repricing, not duration-risk compensation, is the dominant driver of September 2026's tightening in financial conditions.