The great term premium comeback
Sovereign bonds are reintroducing risk compensation, opening up new areas of rates innovation, write Barclays rates heads
The long era of compressed risk premium has ended. For more than a decade, successive rounds of quantitative easing placed persistent downward pressure on sovereign yields, reducing the compensation investors required for bearing duration risk. That regime shifted in 2022, as monetary policy tightening by major central banks contributed to the re-emergence of term premium as a central component
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