The Forces Driving Up Bond Yields Take a Troubling Turn

Analysts have attributed much of the rise in government bond yields this year to inflationary pressures from the war in Iran and the bullish growth expectations tied to the build-out of artificial intelligence infrastructure.The rising yields, they say, reflect expectations that the Federal Reserve will keep interest rates elevated to tamp down inflation from higher oil prices and prevent the economy from overheating from the A.I.build-out.But those analysts say there is a new driver of higher yields, and it is sending more troubling signals.That driver is called the “term premium,” which accounts for the extra return investors want to be paid for the risk of lending to the government.

And based on the moves in the Treasury market, those risks are rising.Last week, the term premium reached its highest level in more than a decade, reflecting investors’ growing concerns about mounting government debts, rising deficits and other fiscal challenges around the world.Mostly regarded as an obscure concept from the bond market, the term premium is now having a real-world impact.Investors’ demand for a higher term premium is driving up yields on Treasuries, which influence interest rates on a range of consumer and corporate debt.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access.

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