Already stuck in one of its worst slumps of the year, the U.S. Treasury market seems to be sending yet another distress signal as yields continue to rise. Just when things couldn’t get worse, the 10-year Treasury’s term premium – essentially the “risk tip” investors demand for holding long-term bonds over a collection of shorter-term notes – has jumped from near-zero to nearly a quarter of a point since the month began, hitting heights unseen since last November.

The term premium, in theory, compensates for all those delightful uncertainties attached to long-term bonds – inflation surprises, policy twists, and, of course, economic drama. Back in the golden days of 2020, the term premium had dropped to a generational low of -1.67%, helped along by tame inflation and the Fed’s relentless bond-buying spree. Yet despite its seemingly abstract nature, market devotees hang onto this indicator for dear life, convinced it holds valuable insights into what investors fear most, whether it’s a runaway inflation train, a debt supply wave, or any other hazards.

Now, in a twist of fate, the term premium is climbing just as bonds get dumped left and right, with traders betting that the Fed’s easing cycle might slow down, all thanks to that oh-so-persistent U.S. economic resilience. As if that weren’t enough, add in a nail-biting presidential race with a potential Republican win on the horizon. Such an outcome would almost guarantee a fresh round of fiscal indulgence – more spending, tax cuts galore, and a healthy dose of tariffs if Donald Trump’s policy playbook is believed, all while U.S. debt towers at record heights.

Economic fundamentals are keeping the pressure on, too. Employment and consumer spending refuse to falter, leaving inflation and growth comfortably above the Fed’s long-term goals, only adding to the term premium’s upward momentum. It all began earlier this month, with an unexpectedly strong September jobs report rattling investors. The Atlanta Fed’s GDP forecast now suggests the economy is expanding at a brisk 3.4% for the third quarter. This figure should be enough to banish any lingering hope that inflation will fade anytime soon.

Even though 10-year inflation expectations still sit below 2.5%, all eyes are on the upcoming Treasury debt issuance projections for hints on long-term supply. In the meantime, the bond market anxiously awaits any faint signal on the future. But with inflation worries revived by solid U.S. data and tariff threats lurking, one has to wonder if the Treasury market is preparing for a new era of higher premiums. That picture-perfect, Fed-engineered soft landing? It may well be slipping out of reach.