Term funding premium: Time is money even absent interest rate risk

Hugo De Vere, Ipek Ozil (), Srini Ramaswamy and Seth Searls
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Seth Searls: https://www.dallasfed.org/research/economists/searls

Dallas Fed Economics from Federal Reserve Bank of Dallas

Abstract: Term premium, a central concept in analysis of interest rates and monetary policy, is generally viewed largely as compensation for bearing interest-rate risk. However, Treasury asset swap spreads strongly indicate the existence of a distinct premium—a term funding premium—associated with merely providing term financing. This funding premium shows promise as a real-time indicator of Treasury market stress.

Keywords: term structure of interest rates; term funding premium; term premium; term rate premium; swap spreads (search for similar items in EconPapers)
Date: 2026-06-25
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