UBS: The term premium Fluctuation poses potential risks to the yield of 10-year US Treasury bonds

Golden Ten Data, July 30th, according to UBS Global Wealth Management, by mid-2025, the 10-year US Treasury yield will drop from the current 4.185% to 3.5%. However, due to the uncertainty of the US election and concerns about budget deficits, the yield may be higher than expected. The rise in term premium (the additional return investors seek for holding long-term bonds rather than short-term bonds) may push up the yield of longer-term bonds. If the market starts to price the fiscal trajectory more positively, the term premium may expand, as unsustainable fiscal dynamics will eventually require investors to seek higher compensation to bear the risk of holding longer-term bonds. It is expected that in the next 6 to 12 months, US Treasury bonds will be mainly influenced by macroeconomic fundamentals.