Long-Term U.S. Treasuries Yield Near 5% as Futures & Term Premiums Surge

The recent futures price move for the 30-year U.S. Treasury bond—115′12, down 0′07 (or about -0.19%)—signals downward price pressure, which corresponds to rising yields in the long end of the curve. This aligns with broader market moves: on January 2, 2026, the 30-year yield touched approximately 4.88%, its highest since early September 2025, propelled by stronger than expected labor market data and a more confident economic outlook.

Inflation remains sticky, and market participants are demanding higher premiums for locking in long horizon cash flows, especially as federal deficits grow and fiscal policy remains uncertain. These dynamics have kept long-term yields elevated despite expectations in some segments of further Federal Reserve easing. Polls and strategy reports suggest that while short-term yields are expected to fall, the 10- and 30-year yields may remain stable or even increase in response to inflation and fiscal risk.

The divergence between long and short maturities—term premium—now is one of the most pronounced since early 2022. This spread reflects increasing investor aversion to duration risk and likely contributes to reduced demand for long-dated securities. Large asset managers and funds (e.g. Pimco, DoubleLine) are reportedly reducing exposure to very long maturities in favor of shorter-term bonds, which trade less volatile and offer similar current income.

Strategically, these developments imply that portfolios heavily tilted toward long duration are increasingly exposed to both rate and inflation risk. With long-term yields unlikely to drop significantly until both inflation expectations and fiscal outlook improve, investors may consider duration hedging, rotating toward shorter maturities, or seeking floating-rate or inflation-protected securities. At the same time, Treasuries are less likely to provide safe haven capital gains in future sell-offs if yields are already elevated.

Open questions include: How fast will inflation return to target? Will fiscal policy tighten sufficiently to tame deficits? How effective will future Fed rate cuts be in lowering long yields if inflation remains above target? And what are the risks if economic data surprises to the upside?