Term premiums

Term premiums

Excess of the yields to maturity on long-term bonds over those of short-term bonds.

Term Premium

The amount by which the yield-to-maturity of a long-term bond exceeds that of a short-term bond. Because one collects coupons on a long-term bond for a longer period of time, its yield-to-maturity will be more. The amount of a term premium depends on the interest rates of the individual bonds.
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However, this relationship ignores term premiums and the policies directly aimed at lowering long-term yields in the unconventional policy period.
Crucially, Cluttons believes that through such public transportation infrastructure investments, the government is adding long term premiums to residential values and commercial rents.
The second strand of the literature uses lower-frequency (monthly) data to test the implication of the portfolio balance effect--namely, that there is a positive relationship between bond term premiums (and, consequently, bond yields) and the maturity structure of the publics holding of Treasury debt and long-term Treasury yields (e.
Their term premiums for next year were agreed at a premium of $2.
Term premiums were set lower as buyers expected reduced import demand from Saudi Arabia and more supply from the Middle East next year due to new refining capacity and expansion of existing plants, the sources said.
The last time term premiums were in this range was probably for Q3 last year when it was around $5.
To the extent that these public sector agencies do respond to term premiums in a manner similar to private investors, that is, by buying more long-term debt (or selling less long-term debt) when the term premium is high, our estimates of the effect of public sector longer term debt supply on the term premium will be biased downward.
It will now have an additional 2 million tons of naphtha a year but its high term premiums set for July 2010-June 2011 at $22.
Compare that to the current value of the bonds (it won't increase since you will use the income for premiums), plus the future value of all the term premiums, if you invested them in an account for 30 years (this is a recaptured opportunity cost since you will not need the term insurance), plus the cash value of the whole life policy.
However, in models of endowment economies, researchers have been able to generate reasonable term premiums by assuming that investors have recursive Epstein-Zin preferences and face long-run economic risks.
In a report that concludes this issue, David Backus and Jonathan Wright discuss the empirical basis for such explanations and the findings of bond pricing models that decompose forward rates into term premiums and expected future short-term rates.