Emanuel Mönch on the Post-Pandemic Term Premium

About this episode

Emanuel Mönch discusses the post-pandemic term premium and its implications for longer-term Treasuries.

The term premium — investors’ compensation for holding longer-term Treasuries instead of T-bills — fluctuates with inflation uncertainty, federal deficit worries, and central banks’ balance sheets. The New York Fed’s Adrian, Crump, and Mönch model estimates the 10-year Treasury term premium is higher than before the pandemic but substantially lower than it was pre- GFC. The post-pandemic term premium will shape the path of longer-term Treasuries as bond investors consider what the new normal looks like. In this episode, we talk with Emanuel Mönch, Professor of Financial and Monetary Economics at the Frankfurt School of Finance and Management, about the models estimating the term premium, what’s driven changes over the last forty years, and how it could shift under a Warsh-led Fed.

People in this episode

Host: Will Compernolle

Guest: Emanuel Mönch

Topics covered

• term premium
• Treasuries
• inflation uncertainty
• federal deficit
• central banks
• bond investing

Keywords

• term premium
• Treasuries
• inflation
• federal deficit
• central banks
• bond investors
• financial economics

Mentioned in this episode

Organizations: New York Fed, Frankfurt School of Finance and Management, Warsh-led Fed

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