The term premium rose after the recent elections, but it remains low. In addition, various factors-such as investors’ heightened concern about relatively weak global economic growth-that pushed the term premium to historically low levels in recent years are expected to dissipate. As such, the forecast reflects the assumption that market participants ultimately adjust their expectations. Although financial-market participants may currently expect changes in policies that lead to faster output growth, CBO’s projection is based on current law. The projected rise in both long-term and short-term rates is consistent with CBO’s projection that economic output will grow somewhat faster than potential (that is, maximum sustainable) output for the next two years. The projected increase in the 10-year rate reflects the anticipated increase in the 3-month rate and an expected increase in the term premium-the premium paid to bondholders for the extra risk associated with holding longer-term bonds. Over the same period, the interest rate on 10-year Treasury notes is projected to rise from its average of 2.1 percent in the fourth quarter of 2016 to 3.2 percent in 2020. The interest rate on 3-month Treasury bills is projected to rise from 0.4 percent in the fourth quarter of 2016 to 2.5 percent by the end of 2020. CBO projects that interest rates on federal borrowing will also rise gradually over the next few years.