US 10-Year Bond Yield


The US 10-Year Bond Yield is the country's benchmark bond yield, used to measure the long-term cost of money in the United States. It is a critical number for financial markets and analysts, and it is significant for setting other yields within the economy.

More About US 10-Year Bond Yield

Continue reading to learn more about:

What determines the 10-year Treasury yield?
What caused the 10-year Treasury yield to rise?
How do U.S. Treasury yields work?
What happens when the bond yield rises?
How does the bond yield affect the stock market?
Why are bond yields and prices inversely related?


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What determines the 10-year Treasury yield?


A 10-year bond yield is the return an investor will receive by holding a government bond for 10 years. The 10-year bond yield reflects market expectations of how the economy will perform over that time period. 10-year bond yields fluctuate daily on global bond markets and are closely watched for signs of how well the economy is doing. 


 
 

What caused the 10-year Treasury yield to rise?


Bond prices rise when yields fall, and lower yields correspond with higher prices because buyers pay less interest to the issuer when they purchase a bond. Bond yields and mortgage rates often move in similar directions, but bonds are less risky than mortgages because they have a guaranteed return of principal when they mature.

 

How do U.S. Treasury yields work?

Treasury yields are bond interest rates that set the benchmark for all other bonds in the market. Typically, the longer the maturity on a Treasury note or bond, the higher its yield because of greater risk. Treasury bonds are sold through auctions held by the Federal Reserve Bank of New York. The coupon is paid semiannually, and you can reinvest coupons when they come due to create an investment ladder.

What happens when the bond yield rises?

Rising bond yields indicate a strengthening economy because the returns that investors can get from bonds are tied to the economy's health. Higher interest rates will also make it more difficult for consumers and corporations to borrow money, which in turn means they're likely to spend less, meaning they'll buy fewer products, leading companies to sell fewer products, resulting in lower profit margins. So, higher interest rates will not just affect one or two industries, but all economic sectors that rely on borrowing money. Rising interest rates also mean investors can earn more on their cash deposits and other financial investments.
 
  • How does the bond yield affect the stock market?

    Bonds have been considered a safe investment for hundreds of years, but investing in bonds still carries some level of risk. They are a bit less volatile than stocks, but they have only provided half as much annual return over the long term as stocks. For a new investor trying to decide where to place their hard-earned money, understanding the relationship between stock and bond yields is important.
  • Why are bond yields and prices inversely related?

    Bond prices and yields are inversely related. For you to buy a bond at a lower price, the issuer must pay you more interest (i.e., offer a higher yield) to compensate for the lower price, as investors are buying less of the bond’s future income stream. Conversely, if you sell a bond for a higher price, you receive less interest by selling off part of the future income stream.