U.S. 10-Year Treasury Yield Premium Rises to 89.48bp, Highest in 1 Year and 3 Months

The duration premium of the U.S. 10-year Treasury bond rose to 89.48 basis points as of the 17th, marking the highest level in 1 year and 3 months. This increase is affecting long-term interest rates in the U.S. bond market and the discount rates for risk assets in South Korea. According to the ACM model from the New York Federal Reserve, the 10-year duration premium is at its highest level since May of last year, exceeding 80 basis points for six consecutive trading days since the 10th. The duration premium is the additional yield that holders of long-term Treasury bonds demand as compensation for bearing interest rate risk. Recent declines in international oil prices and heightened tensions in the Strait of Hormuz have influenced this indicator. Additionally, during the July FOMC press conference, Fed Chair Kevin Warsh noted that the burden of long-term bonds has increased, with the 10-year duration premium surging by 12.37 basis points on the day of the press conference. The Fed maintained its target range for the federal funds rate at 3.50% to 3.75% as of July 29, mentioning the pressures from Middle Eastern conflicts and rising energy prices. In the South Korean market, the pressure on long-term interest rates is reflected in the 10-year government bond yield, which rose to 4.382%.

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