As U.S. federal debt is projected to increase significantly relative to GDP in the coming years, there could be structural pressure for a continued rise in the term premium, said SEB Research’s Jussi Hiljanen in a note.
The term premium refers to the additional yield investors demand to hold long-dated bonds instead of short-dated ones.
“Over time this will result in bond yields, especially longer tenors, rising by more than would be justified by short rate expectations alone,” the chief strategist for U.S. and eurozone rates said.
