Term Premium

Extracted Attributes

• Definition

  The compensation investors require for bearing the risk that interest rates may change over the life of a bond.

• Economic Impact

  Accounts for more than half of the recent rise in 10-year Treasury yields as of early 2025.

• Estimation Model

  Adrian, Crump, and Moench (ACM) statistical model.

• Recent Peak Value

  0.8% (reached on 2025-01-13 for 10-year bonds).

• Primary Components

  Liquidity risk, inflation risk, and interest rate uncertainty.

Timeline

• Publication of the ACM model for estimating term premia in the Journal of Financial Economics. (Source: Federal Reserve Bank of New York)

  2013-10-01

• The FOMC cuts the federal funds rate, but the 10-year Treasury yield begins an unusual rise driven by the term premium. (Source: FRED Blog)

  2024-09-17

• The 10-year term premium reaches its highest level since 2011, surpassing 0.8%. (Source: FRED Blog)

  2025-01-13

• The term premium is recorded at 0.5%, up from 0.05% prior to the September 2024 FOMC meeting. (Source: FRED Blog)

  2025-05-02

• The term premium on a 10-year zero-coupon bond is measured at 0.5194%. (Source: FRED (THREEFYTP10))

  2026-02-13

Premium Bonds

Premium Bonds is a lottery bond scheme organised by the United Kingdom government since 1956. At present it is managed by the government's National Savings and Investments agency. The principle behind Premium Bonds is that rather than the stake being gambled, as in a usual lottery, it is the interest on the bonds that is distributed by a lottery. The bonds are entered in a monthly prize draw and the government promises to buy them back, on request, for their original price. The government pays interest into the bond fund (4.15% per annum in December 2024 but decreasing to 4% in January 2025) from which a monthly lottery distributes tax-free prizes to bondholders whose numbers are selected randomly. The machine that generates the numbers is called ERNIE, an acronym for "Electronic Random Number Indicator Equipment". Prizes range from £25 to £1,000,000 and (since December 2024) the odds of a £1 bond winning a prize in a given month are 22,000 to 1. Investors can buy bonds at any time but they must be held for a whole calendar month before they qualify for a prize. As an example, a bond purchased mid-May must then be held throughout June before being eligible for the draw in July (and onwards). Bonds purchased by reinvestment of prizes are immediately eligible for the following month's draw. Numbers are entered in the draw each month, with an equal chance of winning, until the bond is cashed. As of 2015, each person may own bonds up to £50,000. Since 1 February 2019, the minimum purchase amount for Premium Bonds has been £25. As of January 2025 there are over 128.7 billion eligible Premium Bonds, each having a value of £1. When introduced to the wider public in 1957, the only other similar game available in the UK was the football pools, with the National Lottery not coming into existence until 1994. Although many avenues of lotteries and other forms of gambling are now available to British adults, Premium Bonds are held by more than 24 million people, equivalent to more than 1 in 3 of the UK population.

Web Search Results

• The term premium | FRED Blog - Federal Reserve Bank of St. Louis

  On January 13, 2025, the 10-year term premium reached its highest level since 2011, surpassing 0.8%. At that time, investors required a rate that was 0.8 percentage points higher to invest in long-term over short-term bonds for the same duration. As of May 2, the term premium stood at 0.5%, up from 0.05% before the September 2024 FOMC meeting. That is, the higher term premium accounts for more than half of the recent rise in 10-year Treasury yields, suggesting investors associate greater risk and uncertainty with investing in longer-term debt. [...] To compute the term premium, we need to estimate future short-term interest rates. In our second FRED graph, above, we present a term premium measure on a 10-year zero-coupon bond estimated by economists at the Federal Reserve Board. (Note that FRED also has term premia measures for bonds with maturities between 1 and 9 years.) [...] The FRED® Blog # The term premium Posted on May 12, 2025 At its September 2024 meeting, the Federal Open Market Committee (FOMC) cut its target range for the federal funds rate by 50 points, marking the beginning of a new easing cycle. In the months after, the 10-year Treasury yield rose from 3.65% on September 17, 2024, to a recent peak of 4.79% on January 13, 2025. The FRED graph above shows 10-year Treasury yields for the past decade. An increase in long-term interest rates such as the 10-year Treasury yield is highly unusual at the beginning of a Fed easing cycle.

• Term Premium Estimates

  Conventionally, the term premium is explained as a compensation to the holder of a long-term bond for having invested in this bond instead of having invested in short-term bonds consecutively. A more general interpretation, however, is that the term premium captures the risks for which the holder of a long-term nominal bond is compensated, namely liquidity and inflation risks. Note that, as is the case with all financial instruments, not all risks are offset, e.g., risks that are idiosyncratic to an instrument. [...] We estimate term premiums for Brazil, Chile, Colombia, Mexico and Peru associated with 10-year interest rates. This selection depends on the availability of data and the existence of long-term bond markets. We use simple rates. [...] This decomposition has become important in the context of monetary policy. Largely, because there is a strong interest in understanding how unconventional monetary policies have affected the different components of interest rates. One possible interpretation of the expected average short-term interest rates is the long-term interest rate that would prevail if the agent was risk-neutral. The intuition is straightforward: for an agent who is risk-neutral all his risk premiums should be zero. Thus, the term premium is obtained by the estimation of the risk-neutral long-term interest rate, standardized by the interest rate. In other words, the estimation of the risk-neutral long-term interest rate allows for the identification of the term premium.

• Treasury Term Premia - FEDERAL RESERVE BANK of NEW YORK

  In standard economic theory, yields on Treasury securities are composed of two components: expectations of the future path of short-term Treasury yields and the Treasury term premium. The term premium is defined as the compensation that investors require for bearing the risk that interest rates may change over the life of the bond. Since the term premium is not directly observable, it must be estimated, most often from financial and macroeconomic variables. Current and former New York Fed economists Tobias Adrian, Richard K. Crump, and Emanuel Moench developed a statistical model to describe the joint evolution of Treasury yields and term premia across time and maturities, described in detail in Adrian, Crump, and Moench (2013). [...] We employ the ACM model to derive and share Treasury term premia estimates for maturities from one to ten years from 1961 to the present. Data are available at daily and monthly frequencies, the latter being end-of-month observations. EXPLORE TERM PREMIA ### Related Reading Treasury Term Premia: 1961- Present Tobias Adrian, Richard Crump, Benjamin Mills, and Emanuel Moench _Liberty Street Economics_, May 2014 Pricing the Term Structure with Linear Regressions Tobias Adrian, Richard K. Crump, and Emanuel Moench _Journal of Financial Economics_, October 2013 About Treasury Term Premia Downloadable data include estimates of the term premium for yearly Treasury maturities from one to ten years, as well as fitted yields and the expected average level of short-term interest rates. [...] 10: Specialized Courses The New York Fed offers the Central Banking Seminar and several specialized courses for central bankers and financial supervisors.

• Term Premium on a 10 Year Zero Coupon Bond (THREEFYTP10)

  Frequency: Daily #### Notes: Kim and Wright (2005) produced this data by fitting a simple three-factor arbitrage-free term structure model to U.S. Treasury yields since 1990, in order to evaluate the behavior of long-term yields, distant-horizon forward rates, and term premiums. For the full paper, please go to #### Suggested Citation: Board of Governors of the Federal Reserve System (US), Term Premium on a 10 Year Zero Coupon Bond [THREEFYTP10], retrieved from FRED, Federal Reserve Bank of St. Louis; February 18, 2026. Release Tables An Arbitrage-Free Three-Factor Term Structure Model and the Recent Behavior of Long-Term Yields and Distant-Horizon Forward Rates Term Premiums on Zero Coupon Bonds by Maturity, Monthly Related Data and Content [...] Use the assigned data series variables (a, b, c, etc.) together with operators (+, -, , /, ^, etc.), parentheses and constants (1, 1.5, 2, etc.) to create your own formula (e.g., 1/a, a-b, (a+b)/2, (a/(a+b+c))100). As noted above, you may add other data series to this line before entering a formula. Formula Apply Formula Finally, you can change the units of your new series. Units Select a date that will equal 100 for your custom index: U.S. recession: or Enter date as YYYY-MM-DD #### Add the minimum, maximum, and average calculations of selected lines to the graph Do not include this line in calculations (default) Include this line in calculations Include this line in calculations, but do not display it ADD LINE Add data series to graph [...] Term Premium on a 10 Year Zero Coupon Bond (THREEFYTP10) | FRED | St. Louis Fed Skip to main content Observations 2026-02-13: 0.5194 | Percent, Not Seasonally Adjusted | Daily Updated: Feb 17, 2026 2:03 PM CST Next Release Date: Not Available Observations 2026-02-13:0.5194 Updated: Feb 17, 2026 2:03 PM CST Next Release Date: Not Available 2026-02-13:0.5194 2026-02-12:0.5514 2026-02-11:0.5823 2026-02-10:0.5729 2026-02-09:0.5951 View All Units: Percent, Not Seasonally Adjusted Frequency: Daily 1Y 5Y 10Y MaxTerm Premium on a 10 Year Zero Coupon Bond,Percent,Not Seasonally Adjusted(THREEFYTP10) Units Select a date that will equal 100 for your custom index: U.S. recession: or Enter date as YYYY-MM-DD

• Term Life Insurance — Types and How it Works - Guardian Life

  ## The different types of term policies Level premium: Also called level term, this is the simplest, most common type of policy — your premium stays the same for the entire term. Yearly renewable term: Also called annual renewable term. This policy covers you for a year at a time, with an option to renew (without a medical exam) for the duration of the term — but at a higher cost each year. Compared to level term, premiums will be slightly lower at first, but over a full 10-year, 20-year, or 30-year term, you'll pay more than you would with a level premium policy. Return of premium: This type of term policy pays back all or a portion of your premiums if you live to the end of the term. What's the catch? Your premiums could be 2-5 times higher than a level term policy.2 [...] When your current 20-year term life policy expires, you’ll typically have several options: You can allow the policy to lapse, which means you won’t have coverage moving forward. If your policy is "guaranteed renewable," you can renew it, typically for a year at a time, at a significantly higher premium. (This typically only makes sense for people whose health has significantly deteriorated.) You can apply for a new term policy, typically at a significantly higher premium due to age. Or, if your policy includes a conversion option, you can switch to permanent life insurance for a higher premium — but you’ll have to do so before your term expires. Suggested Articles ## Disclaimer8037360.1 20270731 angle down