Definition
A Treasury yield is the annual rate of return on a US government bond, note or bill if you buy it at its current market price and hold it until it matures. Treasuries range from 4-week bills to 30-year bonds. The 10-year Treasury yield is the most watched: it is the benchmark for 30-year mortgage rates, corporate borrowing costs and the valuation of stocks.
How it works
A Treasury pays a fixed coupon on its face value, but after it is issued it trades every day. Its yield moves opposite to its price: when investors pay less for the same fixed payments, the return on what they paid rises. Yields reflect three things:
- where investors expect the Fed’s short-term rate to be over the life of the bond,
- expected inflation over that period,
- a term premium for the risk of tying money up for longer.
The chart shows constant-maturity yields, which the Treasury interpolates so that the “10-year” always means exactly ten years to maturity.
Example
You buy a new 10-year note for $1,000 with a 4% coupon: $40 a year. A month later market yields for 10-year notes rise to 5%. Nobody will pay $1,000 for your $40 a year when new notes pay $50, so the price of yours drops to about $922 – the price at which its payments yield 5%. Hold it to maturity and you still get your $1,000 back; sell now and you lose about 8%. This is why bond funds lost value in 2022, when yields rose faster than in decades.
Treasury yield in history
Readings at turning points, taken from the same data as the chart above.
| Date | 10-year | 2-year | 3-month | What was happening |
|---|---|---|---|---|
| Jan 1962 | 4.08% | – | – | First month of the 10-year series. |
| Sep 1981 | 15.32% | 16.46% | 15.61% | Record highs across maturities at the peak of the Volcker tightening. |
| May 1990 | 8.76% | 8.64% | 8.01% | Yields still near 9% at the end of the 1980s. |
| Jan 2000 | 6.66% | 6.44% | 5.50% | Peak of the dot-com boom. |
| Jul 2012 | 1.53% | 0.25% | 0.10% | Euro crisis and Fed bond buying push the 10-year to then-record lows. |
| Jul 2020 | 0.62% | 0.15% | 0.13% | Record low for the 10-year in the pandemic. |
| Oct 2023 | 4.80% | 5.07% | 5.60% | Highest 10-year yield since 2007. |
| Oct 2026 | 5.13% | 4.74% | 4.23% | Latest reading. |
Monthly values; market rates are monthly averages of daily data. Explore every month on the 10-Year Treasury Yield chart.
Common mistakes
- “A higher yield means the bond got better.” For an existing bond, a higher market yield means its price fell. Only new buyers benefit from the higher yield.
- Confusing yield with coupon The coupon is fixed when the bond is issued. The yield changes every day with the price.
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Treasury yield: questions and answers
Why do mortgage rates follow the 10-year Treasury yield?
Most 30-year mortgages are repaid or refinanced in about ten years, so lenders and the investors who buy mortgage bonds price them as a spread over the 10-year Treasury.
Are Treasury yields set by the government?
No. The Treasury sets coupons at auction, but yields are determined by trading in the market. The Fed influences them through its policy rate and its purchases or sales of bonds.