Samer Choucair: U.S. Treasury Term Premium Could Rise to 150 Basis Points
Investment leader Samer Choucair said the rise in the U.S. Treasury term premium is no longer simply a reflection of monetary-policy expectations. Instead, it is becoming a signal of a structural shift in the global cost of capital, after BlackRock projected that the premium could rise from roughly 80 basis points today to 125 basis points, and potentially 150 basis points over the longer term.
Choucair said this shift is unfolding at a time when U.S. public debt has exceeded $40 trillion and the federal deficit remains close to $2 trillion, while defense, energy, artificial intelligence, and infrastructure are all competing for the same pool of capital.
Long-Term Yields Are Pricing New Risks
Long-dated U.S. Treasury yields have remained elevated, with the 10-year yield trading near 4.8% in early September 2026 and the 30-year yield moving above 5.2%, following an auction that cleared around 5.22%, the highest level for that maturity since 2001.
Samer Choucair said the persistence of elevated long-term yields, even with the policy rate below the peaks seen in previous cycles, demonstrates that monetary policy is no longer the only driver.
The increasingly important variable is the term premium: the additional compensation investors demand for holding longer-dated bonds and accepting greater exposure to inflation, fiscal, duration, and policy uncertainty.
Choucair noted that the term premium has moved from around negative 1% during the quantitative-easing era to roughly 80 basis points today, with further upside possible if concerns over the U.S. fiscal trajectory and inflation uncertainty persist.
For investors, that distinction matters. A market driven primarily by expectations for Federal Reserve policy can reprice quickly when the central bank changes direction. A market driven by a structurally higher term premium requires a much broader reassessment of capital costs.
Bonds Are Losing Part of Their Traditional Role
Samer Choucair said the post-2008 investment framework, in which central banks and pension funds provided persistent support to the long end of the yield curve, is beginning to break down.
That structural support is being challenged by growing Treasury issuance and an expanding supply of corporate debt linked to artificial intelligence, data centers, energy infrastructure, and other capital-intensive investment themes.
Choucair said markets are now simultaneously repricing three risks: fiscal sustainability, the possibility that inflation remains structurally above the Federal Reserve’s 2% target, and the weakening of the historically negative correlation between equities and bonds.
That last point is especially significant for portfolio construction.
For decades, many institutional portfolios were built on the assumption that government bonds would appreciate when equities sold off, helping stabilize overall returns. If inflation or fiscal risk causes both asset classes to decline at the same time, the traditional diversification role of long-duration sovereign debt becomes less reliable.
A Direct Impact on Capital Allocation
Choucair said a structurally higher term premium is likely to push investors toward shorter and intermediate maturities and toward higher credit quality, rather than encouraging broad bets on a sustained decline in long-term yields.
Higher discount rates will also affect equity valuations, particularly companies whose expected cash flows lie far into the future.
Growth stocks, technology businesses with high duration characteristics, and interest-rate-sensitive real estate could therefore face greater valuation pressure if long-term yields remain structurally elevated.
The impact extends into private markets as well.
Higher financing costs make acquisitions, leveraged transactions, and private-credit structures more expensive, forcing investors to rely on lower leverage and stronger underlying operating growth rather than financial engineering alone.
Samer Choucair said Gulf sovereign institutions and family offices will increasingly need to distinguish between the return on financing and the return on growth.
That could mean holding higher-quality liquidity and fixed-income exposure at the short end of the curve while deploying longer-term capital more selectively into real assets and businesses capable of passing through higher costs, increasing productivity, and producing durable cash flows.
The Gulf Faces a Conditional Opportunity
Choucair said higher U.S. Treasury yields feed directly into financing costs across the Gulf because dollar-denominated sovereign and corporate issuance is typically priced at a spread over U.S. government bonds.
At the same time, relatively low debt-to-GDP ratios across several major Gulf economies, including Saudi Arabia, provide an important comparative advantage.
Saudi Arabia’s $3.25 billion international sukuk issuance in early September attracted demand exceeding $15 billion, while the 10-year tranche was priced at roughly 80 basis points over comparable U.S. Treasuries.
For Samer Choucair, that demand demonstrates that investors continue to differentiate between borrowers even when the global risk-free rate is elevated.
Strong fiscal credibility, manageable leverage, institutional depth, and access to energy-linked revenues can become more valuable when the global cost of capital rises.
The Saudi riyal’s dollar peg also means that shifts in U.S. interest rates are transmitted relatively directly into Saudi monetary conditions and domestic financing costs.
As a result, Vision 2030 projects and investments associated with the Public Investment Fund will remain attractive only where their expected cash flows and productivity gains can exceed the new, higher cost of capital.
The Opportunity Is in Discipline, Not Yield Chasing
Samer Choucair cautioned against treating the Gulf as an automatic net beneficiary of higher global yields.
Higher rates may increase income on liquidity and selected financial assets, but they also raise the cost of project execution, refinancing, real estate development, and corporate expansion.
The investment opportunity, therefore, lies in selectivity rather than simply chasing the highest available yield.
Choucair sees potential value in medium-duration sovereign and quasi-sovereign sukuk, equities linked to non-oil capital expenditure, and companies with strong balance sheets, flexible pricing power, and limited refinancing risk.
The central question is not whether an asset offers a high nominal yield today, but whether that return adequately compensates investors for inflation, duration, credit, and liquidity risks.
The Return of the Cost of Capital
Choucair concluded that the figure of 150 basis points is not, by itself, the core of the investment story.
What matters is what it represents: the return of the cost of capital as an independent financial and political variable.
For much of the period following the global financial crisis, investors could build portfolios around the assumption that central banks would eventually suppress long-term yields when financial conditions became too restrictive.
That assumption is becoming much less reliable.
“The institutional investor can no longer build a strategy around the idea that the Federal Reserve will rescue the yield curve,” Samer Choucair said. “Capital allocation now requires a deeper assessment of fiscal sustainability, credit quality, capital productivity, and an asset’s ability to generate cash in a structurally higher-rate environment.”
For investors, the implications extend well beyond Treasury markets.
A persistently higher term premium changes the hurdle rate for equities, infrastructure, real estate, private equity, venture capital, and sovereign investment programs.
The new investment cycle, Choucair argued, will reward balance-sheet strength, operating cash flow, productivity, and disciplined capital allocation far more than dependence on cheap financing.