After decades of decline, even into negative territory, term premium is rising again.
chartchartchart"We are in a tectonic phase of monetary policy and you are getting asset dislocations across the board, including long bonds," said Solomon Tadesse, head of North American Quant Strategies at Societe Generale.
A 30-year bond bought and held to maturity by a pension fund, for example, quickly becomes 'off the run,' so liquidity risk ends up lifting the term premium.
In the week through Oct. 21 the 30-year bond's price fell for an eighth straight week, the longest selling streak since 2004.
If the Fed is successful in driving down inflation or the economy goes into recession, more investors will flock to 30-year bonds.