Investors demand higher premium for long-dated government bonds as term premium hits multi-year highs

The bond market is sending a very clear message to Washington: holding your debt for decades isn’t worth it unless you pay up. Investors are demanding significantly higher premiums to own long-dated US Treasuries, pushing yields on 30-year bonds above 5.2%, levels not seen since 2007.

The term premium on 10-year Treasuries, essentially the extra compensation investors require for locking up their money over a longer horizon instead of rolling short-term bonds, has surged to an estimated range of 0.80% to 1.35%. Earlier this year, that figure sat below 0.50%.

What’s driving the sell-off

Two forces are colliding. On one side, sticky inflation has made investors skeptical that the Federal Reserve will bring prices under control anytime soon. On the other, the US government keeps issuing enormous amounts of debt to fund persistent deficits, flooding the market with supply at a time when demand is shrinking.

The US fiscal deficit reached $1.6 trillion for the year ending April 2024, and the trajectory hasn’t improved since. More bonds hitting the market means buyers can be pickier, and right now they’re picking higher yields.

Making matters worse, the traditional big buyers of Treasuries have stepped back. Central banks abroad have been reducing their holdings, and pension funds, once reliable absorbers of long-duration debt, have scaled back purchases.

The 10-year Treasury yield stood near 4.75% on August 18, while 30-year yields traded in the 5.2% to 5.3% range during recent sessions. For context, the 30-year yield spent most of the post-2008 era well below 4%.

The Fed meeting that made things worse

The Federal Reserve’s July 30 meeting poured gasoline on an already smoldering bond market. Long bonds sold off sharply in the aftermath, with 30-year yields spiking above 5.20% intraday as traders expressed deep skepticism about the central bank’s willingness or ability to tame inflation further.

The 60/40 portfolio is broken (again)

The classic 60/40 strategy, 60% stocks and 40% bonds, has relied on a simple premise for decades: when stocks fall, bonds rise, cushioning the blow. That relationship has fractured. The 60-day correlation between S&P 500 returns and Treasury returns has reached multi-decade highs as of May 2026. In plain terms, stocks and bonds are moving in the same direction far more often than they used to.

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