How Does the 10-year Treasury Bond Work?

It’s not just financial advisors that place emphasis on this measuring stick. Treasury Secretary Scott Bessent stressed the agency’s focus on it back in 2025, saying, “He [the president] and I are focused on the 10-year Treasury and what is the yield of that,” when asked about lower interest rates.

In this article, we will take a look at the 10-year Treasury Bond yield, how it works, and why it’s looked at more often than other bonds. 

How 10-year Treasury Bonds work

Treasury Bonds are a debt instrument issued by the U.S. government, and they come in multiple maturity lengths, from one year to 30 years. These bonds help the government in financing debt. Investors commonly add Treasury Bonds of their portfolio for the fixed interest rates and to add stability to their portfolio. 

How yields and prices work

Bonds often act in opposite directions as the stock market, and operate on different principles. In short, while indices and stocks run primarily on emotion, bonds function on pure math. Prices for bonds fall as interest rates increase, which can be triggered by sell-offs of bonds. In contrast, when people buy, the prices go up but the interest rates drop.

We saw this during COVID, when the rising Federal Reserve rate caused prices of bonds to drop across the board.

The 10-year Treasury Bond as an economic indicator

Typically, the 10-year Treasury Bond yield is used as a benchmark for interest rates for mortgage and corporate debt. When the bond interest rate drops, there’s a possibility other rates will drop as well—and vice versa. 

How the 10-year Treasury Bond compares to the Federal Funds rate. For example, if the 10-year rate is higher than the Federal Funds rate, many investors and analysts see impending monetary policies. Lower rates suggest looser monetary policies and more accessible credit. 

Let’s look at today’s rates: The Federal Funds rate is at 4.33% and the 10-Year Treasury Bond Rate is at 4.22%. The rates are almost identical, but on the overall higher side, suggesting that we’ll likely continue to see stricter monetary policy. 

What all affects the 10-year Treasury Bond yield? There are few key influences:

• Selling  Treasury Bonds – price drop, higher interest rates
• Buying Treasury Bonds - price increase, lower interest rates
• Inflation
• Default risk
• Political instability

What does this mean, investing wise?

Currently, the Treasury rate is higher than it's been in 15 years. According to J.P. Morgan Chase, we can identify a few main reasons for this hike:

• Inflation
• Tariffs
• Weaker foreign demand for U.S. Treasury Bond and notes
• Hedge funds trading cash-futures betting on the price cash bonds rising lost out as prices dropped, causing a sell-off loop

Furthermore, the weaker demand globally for U.S. treasury products has been intensified by foreign entities and central banks dumping $48 billion in treasury funds since March. This has played a part in keeping interest rates higher, as the Treasury attempts to incentivize these investors to return. 

For many investors, the current state of the Treasury Bonds suggest it’s time to look elsewhere for a lower-risk investment. Currently, the interest rates are not high enough to offset inflationary pressures, and locking money away for longer than a year can make an uncertain economy more difficult. 

It may be worth it to speak to an advisor about portfolio alternatives to Treasury Bonds and other fixed-income assets. 

More on the economy

The Treasury Bond rate is essential to tracking the economy, but it isn’t the only factor. Sign up for our newsletter for more insight about the economy and how it relates to your portfolio.

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