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October 13, 2026
Partner, Chief Economist
US 10-year Treasury yields have risen by about 100 bps since the beginning of the year. A model developed by Fed economists D’Amico, Kim and Wei decomposes Treasury yields to show what is driving the move. Updated estimates released point to two main factors:
1. The expected path of real short rates has moved higher. The model estimates that the average real short rate expected over the next 10 years has increased. Lower oil prices or weaker growth could ease some of this pressure and help bring longer-term rates down.
2. The term premium has risen. The term premium is the additional yield investors demand to hold a long-dated bond beyond what the expected path of Fed policy would imply. It can therefore capture compensation for longer-term risks, including concerns around fiscal sustainability or Fed credibility.
The bottom line is that higher long rates this year reflect both the higher expected policy path from the Fed and investors asking for more compensation to hold duration.
Written by Allison Boxer
Data as of 9/30/2026. Sources: D'Amico, S., D. H. Kim, and M. Wei (2018), "Tips from TIPS: The Informational Content of Treasury Inflation-Protected Security Prices," Journal of Financial and Quantitative Analysis, 53(1), 395-436. Kim, Don, Cait Walsh, and Min Wei (2019). "Tips from TIPS: Update and Discussions," FEDS Notes. Washington: Board of Governors of the Federal Reserve System, May 21, 2019, https://doi.org/10.17016/2380-7172.2355
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