Maturity premium

Unless otherwise defined, the difference in yield between long-term and short-term (government) bonds (extra average return from investing in long-term versus short-term Treasury securities). It is taken as a measure of market participants’ expected assessment of interest rate risk. – See contingent swap, term structure, liquidity premium, yield spread, risk premium, yield curve, interest rate swap. – Cf. Deutsche Bundesbank Monthly Report of October 2006, p. 43 (separation of liquidity risk and interest rate risk, thereby saving on the term premium), ECB Monthly Report of December 2006, p. 34 et seq. (relationship between term premium and interest rate differential; overviews).

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