Barclays strategists Demi Hu and Anshul Pradhan say high U.S. Treasury yields do
not necessarily mean Treasures are cheap. If higher yields mainly reflect
market expectations for short-term rates, investors earn less extra compensation
for holding longer-duration instruments versus rolling into shorter maturities.
They note a higher term premium raises compensation but also reflects greater
uncertainty and duration risk. A reassessment of near-term monetary policy would
mainly affect the front and mid-curve; a sustained rise in the term premium or
in the long-run neutral rate would place greater pressure on the long end.
