Why it matters
If long rates are driven by term premium rather than growth alone, policy easing may not deliver the expected relief to mortgages, infrastructure finance or equity discount rates.
Evidence ledger
Supporting and contradictory evidence are displayed together. “Strength” is editorial judgment, not probability.
The SF Fed model places the 10-year term premium at 1.30%, versus 1.23% a year earlier.
SF Fed · 19 Aug 2026 ↗GAO says debt held by the public exceeded $31tn in February and interest expense was about $1tn in FY2025.
US GAO · 31 Mar 2026 ↗The 10-year yield was 4.71% versus 4.19% for the 2-year on 18 August.
Federal Reserve H.15 · 19 Aug 2026 ↗GAO reports Treasury auctions continue to attract several investor types; no current funding dysfunction is implied.
US GAO · 31 Mar 2026 ↗SF Fed estimate was 1.30% versus 1.31% at the July meeting.
SF Fed · 19 Aug 2026 ↗What would change our mind?
A sustained decline in model-based term premium alongside improving fiscal projections, strong auction demand and falling long-run inflation compensation would challenge the thesis.
Scorecard—not a black box
Cross-asset implications
| Asset | Bias | Conditional logic |
|---|---|---|
| Long Treasuries | Headwind | More duration supply can require higher compensation. |
| Banks | Mixed | Steeper curves help margins but raise funding and credit risks. |
| Gold | Conditional | Fiscal concern supports; real yields remain a counterforce. |
| USD | Mixed | Higher yields support carry, fiscal risk can work oppositely. |
Directional labels are scenario sensitivities, not recommendations or guaranteed relationships.
Scenario set
Base · Premium stays high
Issuance and uncertainty keep long yields elevated relative to policy rates.
Strengthens · Buyer strike
Weak auctions and inflation risk force a material repricing of duration.
Breaks · Credible consolidation
Fiscal trajectory improves and inflation uncertainty falls persistently.
Public change log
Balance-sheet runoff ended.
GAO highlighted refinancing risks.
Fed flagged higher term premium.
10-year yield remained above 4.7%.