Defined terms for the annuity market and lifetime income landscape.
Term premium is the additional yield lenders require to hold a longer-maturity bond rather than rolling a series of short-maturity bonds over the same period, compensating for the interest rate risk and uncertainty embedded in the longer commitment.
The yield curve is the pattern of interest rates by maturity for bonds of comparable credit quality, most commonly US Treasury securities, showing what the market currently pays lenders across short-term, medium-term, and long-term bonds.
Yield curve inversion is the pattern where short-term interest rates on bonds of comparable credit quality exceed long-term interest rates on the same class of bonds, reversing the typical upward slope of the term-structure.
