Treasury Duration Supply and Term Premiums: Working Paper 2026-11

Michael McGrane

No 62759, Working Papers from Congressional Budget Office

Abstract: In this paper, I estimate the effect of Treasury duration supply on term premiums with an arbitrage-free dynamic term structure model. I find that a 5 percentage-point increase in Treasury duration supply (which corresponds approximately to a 1 percentage-point increase in the debt-to-GDP ratio) results in a 2.8 basis-point increase in the 10-year term premium. I also show that an expected 5 percentage-point increase in Treasury duration supply 5 years in the future results in an immediate increase in the 10-year term premium of 1 basis point, increasing to 2.8 basis points

JEL-codes: E43 G12 G17 (search for similar items in EconPapers)
Date: 2026-10-05
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