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30Y Treasury Stress

High long-term yields are not inherently recessionary. This module determines whether the move is being driven primarily by growth expectations, inflation expectations, fiscal risk or term premium.

Levels

30Y yield5.43%
10Y yield5.10%
2Y yield4.77%
10Y–2Y+0.33%
10Y–3M+0.82%
10Y real yield (TIPS)2.78%
10Y inflation expectations (breakeven)2.35%
10Y term premium (Kim-Wright)1.07%
30Y historical percentile50

What is driving the long end? (3-month decomposition)

TERM PREMIUM / FISCAL-SUPPLY RISK
Curve move: bear flattening
Component (3M change)ChangeShare of 10Y moveReading
10Y nominal yield+53 bps100%= real yield + breakeven inflation
· 10Y real yield (TIPS)+43 bps81%Growth expectations, policy path, term premium
· 10Y breakeven inflation+11 bps21%Inflation expectations (+ inflation risk premium)
10Y term premium (model)+29 bps55%Fiscal / supply / uncertainty compensation
Expected short-rate path (10Y − TP)+24 bps—Market-implied average policy rate
2Y yield+61 bps—Near-term policy expectations
3M bill+44 bps—Current policy
30Y yield+34 bps—

Over ~3 months the 10Y yield moved +53 bps: real yield +43 bps, breakeven inflation +11 bps, term premium (model) +29 bps.

Primary driver of the move: term premium / fiscal-supply risk.

Curve shape change (2Y vs 10Y): bear flattening.

High long-term yields are not inherently recessionary. The decomposition (nominal = real + breakeven; nominal = expected path + term premium) relies on market-implied and model-based estimates, which carry their own premia and model error.

Yield curve: today vs 3 and 12 months ago

How to read long-end moves

  • Long yields ↑ via breakevens — rising inflation expectations. Feeds Inflation Stress, not Recession Stress.
  • Long yields ↑ via term premium (real yields up, expected path flat) — fiscal/supply or uncertainty compensation. Tightens conditions; not by itself a recession signal.
  • Long yields ↑ with 2Y ↑ — stronger growth / tighter expected policy (real yields).
  • Long yields ↓ led by the short end (bull steepening, 2Y below 3M) — markets expect easing, often because of growth fears. Check credit spreads and labour data for confirmation.
  • Long yields ↓ via breakevens — falling inflation expectations (disinflation or demand shock).

30Y Treasury yield

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10Y–3M spread

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10Y term premium (Kim-Wright)

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