We consider modelling the yield spread between 10-year and 3-month interest rates with a stationary 3-regime threshold autoregressive model with possibly a unit root in the middle regime, as suggested by arbitrage behavior in presence of small transaction costs. To this end, we develop a test of unit root against such a TAR alternative. The computation of our test statistic relies on a new data-driven choice of the set of admissible thresholds which succeeds in increasing its power. When applied to French, German, New Zealander and US data, this test rejects the null, providing support to the expectations theory of the term structure.