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

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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.

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  • Hugo De Vere & Ipek Ozil & Srini Ramaswamy & Seth Searls, 2026. "Term funding premium: Time is money even absent interest rate risk," Dallas Fed Economics 103435, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:d00001:103435
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    File URL: https://www.dallasfed.org/research/economics/2026/0625
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