How sovereign borrowing costs are set — from the front-end policy anchor through breakevens, term premium, and the shape of the curve. The vocabulary that turns a 10-basis-point move on the 10-year into a regime read.
The term premium is the extra yield investors demand to hold a long-dated bond instead of rolling short-dated instruments over the same horizon. It compensates for the risk that future short rates, inflation, or fiscal supply diverge from expectations, and is the residual in nominal yields once the expected-rates path is stripped out.
A basis point (bp) is one-hundredth of a percentage point (0.01%); 25bp equals 0.25 percentage points, the conventional increment of a single central-bank rate move. Policymakers quote rate changes, yields, and spreads in basis points to avoid the ambiguity of percentage-of-a-percentage phrasing.
A bull steepener is a yield-curve move where short-dated yields fall faster than long-dated yields, steepening the curve as the front end "bulls" on rate-cut expectations. It is the classic signature of an easing cycle beginning, when markets price the central bank toward the exit.
Convexity is the curvature in the relationship between an asset's price and an underlying variable such as yield — the second-order term beyond linear (delta or duration) sensitivity. Positive convexity means gains accelerate and losses decelerate as the variable moves, an asymmetry that rewards holders when volatility rises.
A resampling technique that draws contiguous blocks of a multivariate time series after applying a rotation to its coordinates, preserving short-run serial dependence and the joint cross-correlation structure of variables while remaining robust to structural breaks. Used to build confidence bands and probability estimates without assuming a fixed parametric model.
SOFR is the Secured Overnight Financing Rate, the volume-weighted median cost of borrowing cash overnight collateralised by US Treasuries in the repo market. Published daily by the New York Fed, it is the dollar replacement for LIBOR and the benchmark underpinning most dollar derivatives and floating-rate debt.