Term premium! Ever heard of it? It's the extra dollop of yield you get for holding onto long-term government bonds, like 10-year U.S. Treasuries. We're using the ACM model to show this in our #datavisualization.

Why??? For the first time since 2017, the term premium is positive.

As Ethan Wu from the FT explains "if the term premium reverted to its 30-year average, it could add something like 80 basis points to the 10-year yield, leaving it not far from 6 per cent".

So, why is this happening? There are several reasons suggested:

1️⃣ With inflation becoming more unpredictable, the risk of changing interest rates is tougher to gauge, leading investors to seek a higher yield.

2️⃣ The US government's growing debt and the looming risk of hitting the debt ceiling again may increase the perceived credit risk with Treasuries.

3️⃣ There seems to be less demand for long-term US Treasuries, especially as countries like China reduces its holdings, even though the supply of Treasuries continues to rise.

4️⃣ After about forty years of having a strong bond market, risks are being reassessed, possibly mean reverting to where they were before.

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