diff --git "a/81cbc655-6af8-4947-ab5d-6d95a03c1aac.json" "b/81cbc655-6af8-4947-ab5d-6d95a03c1aac.json" new file mode 100644--- /dev/null +++ "b/81cbc655-6af8-4947-ab5d-6d95a03c1aac.json" @@ -0,0 +1,40 @@ +{ + "interaction_id": "81cbc655-6af8-4947-ab5d-6d95a03c1aac", + "search_results": [ + { + "page_name": "Treasury Notes \u2014 TreasuryDirect", + "page_url": "https://www.treasurydirect.gov/marketable-securities/treasury-notes/", + "page_snippet": "U.S. Department of the TreasuryWe sell Treasury Notes for a term of 2, 3, 5, 7, or 10 years. Department of the Treasury Bureau of the Fiscal Service Attention: Auctions 3201 Pennsy Drive, Building E Landover, MD 20785", + "page_result": "\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n \r\n \r\n \r\n Treasury Notes \u2014 TreasuryDirect\r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n\r\n \r\n\r\n
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Treasury Notes

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We sell Treasury Notes for a term of 2, 3, 5, 7, or 10 years.

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Notes pay a fixed rate of interest every six months until they mature.

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You can hold a note until it matures or sell it before it matures.

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Notes at a Glance

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Now issued inElectronic form only
Matures in2, 3, 5, 7, or 10 years
Interest rateThe rate is fixed at auction. It doesn\u2019t change over the life of the note.
\r\n It is never less than 0.125%.
\r\n See Results of recent note auctions.
Interest paidEvery six months until maturity
Minimum purchase$100
In increments of$100
Maximum purchase$10 million (non-competitive bid)
\r\n 35% of offering amount (competitive bid)
\r\n (See Buying a Treasury marketable security for information on types of bids.)
Auction frequency2, 3, 5, and 7-year notes: Monthly
\r\n 10-year notes: Feb., May, Aug., Nov.
\r\n Reopenings of 10-year notes: 8 times/year
\r\n See the Auction calendar for specific dates.
TaxesFederal tax due each year on interest earned.
\r\n No state or local taxes
Eligible for STRIPS?Yes
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Latest Rates

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How do I ...\r\n\r\n \r\n for a note\r\n \r\n\r\n

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Buy a Treasury marketable security

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Deal with an old paper Treasury Note

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Find out about tax forms and tax withholding

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Get my money when my security matures (redeem the security)

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Reinvest my money in the same type of security

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Sell my security before it matures

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Transfer from one system to another

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Understand pricing and interest rates

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Related topics:

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About Treasury Marketable Securities

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About Auctions

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Treasury Bills

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Treasury Bonds

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TIPS

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FRNS

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We're Here to Help

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We welcome your questions and comments.

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Write Us

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If you write to us and want a response, please put your address in your letter (not just on the envelope).

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Department of the Treasury
\r\n Bureau of the Fiscal Service
\r\n Attention: Auctions
\r\n 3201 Pennsy Drive, Building E
\r\n Landover, MD 20785

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Call Us

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For general inquiries, please call us at 844-284-2676 (toll free)

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E-mail Us

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\r\n \"\"\r\n
\r\n Secure .gov websites use HTTPS
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Treasury Notes

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We sell Treasury Notes for a term of 2, 3, 5, 7, or 10 years.

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Notes pay a fixed rate of interest every six months until they mature.

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You can hold a note until it matures or sell it before it matures.

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Notes at a Glance

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Now issued inElectronic form only
Matures in2, 3, 5, 7, or 10 years
Interest rateThe rate is fixed at auction. It doesn\u2019t change over the life of the note.
\r\n It is never less than 0.125%.
\r\n See Results of recent note auctions.
Interest paidEvery six months until maturity
Minimum purchase$100
In increments of$100
Maximum purchase$10 million (non-competitive bid)
\r\n 35% of offering amount (competitive bid)
\r\n (See Buying a Treasury marketable security for information on types of bids.)
Auction frequency2, 3, 5, and 7-year notes: Monthly
\r\n 10-year notes: Feb., May, Aug., Nov.
\r\n Reopenings of 10-year notes: 8 times/year
\r\n See the Auction calendar for specific dates.
TaxesFederal tax due each year on interest earned.
\r\n No state or local taxes
Eligible for STRIPS?Yes
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Latest Rates

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How do I ...\r\n\r\n \r\n for a note\r\n \r\n\r\n

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Buy a Treasury marketable security

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Deal with an old paper Treasury Note

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Find out about tax forms and tax withholding

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Get my money when my security matures (redeem the security)

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Reinvest my money in the same type of security

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Sell my security before it matures

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Transfer from one system to another

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Understand pricing and interest rates

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About Treasury Marketable Securities

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About Auctions

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Treasury Bills

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Treasury Bonds

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TIPS

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FRNS

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We're Here to Help

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We welcome your questions and comments.

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Write Us

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If you write to us and want a response, please put your address in your letter (not just on the envelope).

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\r\n \"\"\r\n
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Department of the Treasury
\r\n Bureau of the Fiscal Service
\r\n Attention: Auctions
\r\n 3201 Pennsy Drive, Building E
\r\n Landover, MD 20785

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Call Us

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For general inquiries, please call us at 844-284-2676 (toll free)

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E-mail Us

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\r\n\r\n \r\n\r\n \r\n \r\n\r\n\r\n\r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n", + "page_last_modified": " Mon, 11 Mar 2024 20:13:53 GMT" + }, + { + "page_name": "Treasury Yield Definition | Investing Dictionary | U.S. News", + "page_url": "https://money.usnews.com/investing/term/treasury-yield", + "page_snippet": "The driving principle behind treasury yields is demand. In other words, the higher the demand for treasury bonds, the lower the yield and vice versa. Yields drop when demand is high and rise when demand is low.That's because bonds can be sold on the secondary market, where investors can purchase previously issued financial instruments like bonds. If prices on the secondary market differ from the primary market, yields automatically adjust accordingly. For example, if you purchase a bond on the secondary market at a lower price than it originally sold for, its yield would rise because the Treasury still has to issue a payment equal to what the original yield would have produced. Investors typically want to earn as much as possible on their investments, and Treasury bonds are relatively safe investments that don't tend to pay out as much as other investments, such as stocks or real estate. The Treasury sells bonds at auction, and prices and yields change along with demand. If Treasury yields are high, it means that bond prices are low and investor demand is low due to higher confidence in other investments. The reverse also holds true. Treasury yields are a useful indicator of the market's economic outlook. If Treasury yields show that a period of economic growth is likely, investors may want to rebalance their portfolios to include more aggressive, riskier investments to take advantage of shifting macroeconomic conditions. This is a crucial economic benchmark because it affects other interest rates. Mortgage rates and other borrowing costs also tend to increase when the yield on the 10-year note goes up. Investors typically want to earn as much as possible on their investments, and Treasury bonds are relatively safe investments that don't tend to pay out as much as other investments, such as stocks or real estate.", + "page_result": "\n \n\n \n \n\n \n \n \n \n \n\n\n Treasury Yield Definition | Investing Dictionary | U.S. News\n\n\n\n\n\n \n \n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n \n \n\n \n \n \n\n
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Treasury Yield Definition

By Adam Carpenter
|
Updated: Dec. 7, 2023
|
By Adam Carpenter
|
Updated: Dec. 7, 2023

Table of Contents

More

A Treasury yield refers to the effective yearly interest rate the U.S. government pays on money it borrows to raise capital through selling Treasury bonds, also referred to as Treasury notes or Treasury bills depending on maturity length.

Long-term bond yields are also indicators of investor confidence in the U.S. economy, and when Treasury bonds have low yields, people tend to look to stocks and other investments for better returns.

Related:

Sign up for stock news with our Invested newsletter.

The driving principle behind treasury yields is demand. In other words, the higher the demand for treasury bonds, the lower the yield and vice versa. Yields drop when demand is high and rise when demand is low.

That's because bonds can be sold on the secondary market, where investors can purchase previously issued financial instruments like bonds. If prices on the secondary market differ from the primary market, yields automatically adjust accordingly. For example, if you purchase a bond on the secondary market at a lower price than it originally sold for, its yield would rise because the Treasury still has to issue a payment equal to what the original yield would have produced.

The 10-year yield is a good example of why people pay attention to bond yields. This is a crucial economic benchmark because it affects other interest rates. Mortgage rates and other borrowing costs also tend to increase when the yield on the 10-year note goes up.

Investors typically want to earn as much as possible on their investments, and Treasury bonds are relatively safe investments that don't tend to pay out as much as other investments, such as stocks or real estate. The Treasury sells bonds at auction, and prices and yields change along with demand. If Treasury yields are high, it means that bond prices are low and investor demand is low due to higher confidence in other investments. The reverse also holds true.

A yield curve refers to a line graph that shows how yields of bonds with the same initial value change according to their maturity dates.

Commonly cited maturity dates include:

    \n
  • one month 
    • \n
  • three months
    • \n
  • one year
    • \n
  • two years
    • \n
  • three years
    • \n
  • five years
    • \n
  • seven years
    • \n
  • 10 years
    • \n
  • 20 years
    • \n
  • 30 years
    • \n

Economists compare a common set of yield curves as an indicator of the strength of the economy. If longer-term yields are higher than shorter-term yields, investors tend to have a positive long-term economic outlook.

On the other hand, if the longer-term yields are lower than short-term yields, that indicates a lack of confidence in the long-term strength of the economy.

There are three types of yield curves:

    \n
  • Normal yield curves slope upward, showing how long-term bonds typically have higher yields to compensate investors for the increased risk of holding bonds over longer periods. This reading indicates that the market anticipates higher interest rates, increasing economic growth and higher inflation.
    • \n
  • Flat yield curves demonstrate that regardless of the maturity dates of different bonds, their yields are about the same. A flattening curve indicates a transitional period of uncertainty about where the economy is headed. It could mean that there are expectations of decreasing inflation or an impending federal funds rate increase.
    • \n
  • Inverted yield curves slope downward, which means that short-term bonds have higher yields than long-term bonds. Inverted yield curves often signal an upcoming period of economic decline.
    • \n

Read:

The Ultimate Guide to Bonds.

Treasury yields are a useful indicator of the market's economic outlook. If Treasury yields show that a period of economic growth is likely, investors may want to rebalance their portfolios to include more aggressive, riskier investments to take advantage of shifting macroeconomic conditions.

FAQs

Between 1955 and 2018, the yield curve inverted before each recession \u2013 making it a good warning sign that a period of economic decline is likely. An inversion does not always guarantee a recession, however.

No. A Treasury yield is the effective annual interest rate paid by the U.S. government to a bondholder. A Treasury bond is a loan that you make to the government.

Higher long-term yields mean that demand for Treasury bonds is decreasing, which indicates that investors are looking elsewhere for better returns.

Some of the offers on this site are from companies who are advertising clients of U.S. News. Advertising considerations may impact where and in what order offers appear on the site but do not affect any editorial decisions, such as which financial institutions we write about and how we evaluate them.

Related Terms

Bond Yield Definition

Treasury Bond Definition

Municipal Bond Definition

TreasuryDirect Definition

\n\n
\n\n \n \n \n\n \n \n \n ", + "page_last_modified": "" + }, + { + "page_name": "What Is The 10-Year Treasury Yield? Why Is It So Important? \u2013 ...", + "page_url": "https://www.forbes.com/advisor/investing/10-year-treasury-yield/", + "page_snippet": "The 10-year Treasury gets more press than any other government security. Investors pay keen attention to movements in 10-year Treasury yields because they serve as a benchmark for other borrowing rates, such as mortgage rates. When the 10-year yield fluctuates, it can have significant implications aOn July 5, 2016, the 10-year Treasury yield had fallen to a (then) record low of 1.37% shortly after the conclusion of a referendum in which the citizens of the United Kingdom voted to leave the European Union. This political earthquake rattled markets around the world, which is why the 10-year yield declined. It\u2019s the action in the secondary market that determines the yield. This is important to note because it\u2019s this rate that people refer to when they\u2019re talking about Treasuries. The coupon rate, while technically the interest rate you will receive in relation to the Treasury\u2019s face value, will likely be different from the effective yield you end up getting. Prices (and therefore effective yields) change for bonds almost constantly. That\u2019s because a bond\u2019s price is inversely related to yield: When demand is high and Treasury prices rise, yields fall\u2014conversely, when demand is low Treasury prices fall and yields rise. When the 10-year yield fluctuates, it can have significant implications across the financial landscape. A 10-year Treasury is a bond that guarantees interest plus repayment of the borrowed money in a decade. The 10-year Treasury is just one of a handful of securities issued by the U.S. government.", + "page_result": "\n\n\t\n\t\t\n\t\t\n \t\t\n\t\t\n\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t What Is The 10-Year Treasury Yield? Why Is It So Important? – Forbes Advisor\n\n\n\n\n\n\n\n\n\n\n\n \n \n\t\t\t\t\n\t\t\n\t\t\n\t\t\t\n\t\t\n\n\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\t\n\t\t\n\n\n\t\t\t \t\t \n \n \t\n \n\n\t\t\n\t
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What Is The 10-Year Treasury Yield?

\n
\"Rebecca
\"Rebecca
Rebecca BaldridgeContributor
Rebecca Baldridge, CFA, is an investment professional and financial writer with over twenty years of experience in the financial services industry. In addition to a decade in banking and brokerage in Moscow, she has worked for Franklin Templeton Asset Management, The Bank of New York, JPMorgan Asset Management and Merrill Lynch Asset Management. She is a founding partner in Quartet Communications, a financial communications and content creation firm.
Rebecca Baldridge
\"Rebecca
Rebecca BaldridgeContributor
Rebecca Baldridge, CFA, is an investment professional and financial writer with over twenty years of experience in the financial services industry. In addition to a decade in banking and brokerage in Moscow, she has worked for Franklin Templeton Asset Management, The Bank of New York, JPMorgan Asset Management and Merrill Lynch Asset Management. She is a founding partner in Quartet Communications, a financial communications and content creation firm.
Contributor
\"Benjamin
Benjamin Curry
Benjamin Curryeditor
Ben is the Retirement and Investing Editor for Forbes Advisor. With two decades of business and finance journalism experience, Ben has covered breaking market news, written on equity markets for Investopedia, and edited personal finance content for Bankrate and LendingTree.

    Reviewed By

    Benjamin Curry
    Benjamin Curry
    Benjamin Curryeditor
    Ben is the Retirement and Investing Editor for Forbes Advisor. With two decades of business and finance journalism experience, Ben has covered breaking market news, written on equity markets for Investopedia, and edited personal finance content for Bankrate and LendingTree.
      editor

      Reviewed By

      Updated: Oct 23, 2023, 10:32am

      \n
      \n Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.\n
      \n
      \n \n \n \n
      \n \"What\n Getty\n
      \n
      \n
      \n

      The 10-year Treasury gets more press than any other government security. Investors pay keen attention to movements in 10-year Treasury yields because they serve as a benchmark for other borrowing rates, such as mortgage rates. When the 10-year yield fluctuates, it can have significant implications across the financial landscape.

      \n\n
      \n

      What Is a 10-Year Treasury?

      \n

      A 10-year Treasury is a bond that guarantees interest plus repayment of the borrowed money in a decade. The 10-year Treasury is just one of a handful of securities issued by the U.S. government. Others include:

      \n

      \u2022\u00a0\u00a0Treasury bills, also known as T-bills, are short-term securities, with maturities that range from a few days to 52 weeks. Treasury bills are sold at a discount to their face value, meaning they provide investors with returns by paying them back at the full, not discounted, rate.

      \n

      \u2022\u00a0\u00a0Treasury notes, also known as T-notes, are issued with maturities of two, three, five, seven and 10 years. They pay interest every six months and return their face value at maturity.

      \n

      \u2022\u00a0\u00a0Treasury bonds, also known as T-bonds, are the longest-term government securities, issued for 20 and 30 years. They pay interest every six months and return their face value at maturity.

      \n

      Treasuries vs Treasurys

      \n

      When reading about a group of 10-year Treasuries, you may see it written one of two ways: Treasuries or Treasurys\u00ad. This unorthodox plural, spelled with -ys instead of the conventional -ies, is used by many financial and media outlets. There aren\u2019t any good explanations for this tendency, but publications like CNBC and The Wall Street Journal spell it -ys.

      \n

      What Is the 10-Year Treasury Yield?

      \n

      The 10-year Treasury yield is the current rate Treasury notes would pay investors if they bought them today.

      \n

      Changes in the 10-year Treasury yield tell us a great deal about the economic landscape and global market sentiment, professional investors analyze patterns in 10-year Treasury yields and make predictions about how yields will move over time. Declines in the 10-year Treasury yield generally indicate caution about global economic conditions while gains signal global economic confidence.

      \n

      On October 23, 2023, the 10-year Treasury note topped 5.00% once again for the first time in more than 15 years. However, back in April 2000, the 10-year yield was 6.23%. If you look at the chart below, you\u2019ll see that 10-year Treasury yields have fallen dramatically since 1990.

      \n
      \n


      \nLet\u2019s take a closer look at the 10-year Treasury yield in 2016. On July 5, 2016, the 10-year Treasury yield had fallen to a (then) record low of 1.37% shortly after the conclusion of a referendum in which the citizens of the United Kingdom voted to leave the European Union. This political earthquake rattled markets around the world, which is why the 10-year yield declined.

      \n

      Meanwhile, when Donald Trump was elected president of the United States in November 2016, the 10-year yield gained considerably, reaching 2.60% by mid December.

      \n

      Note that the 10-year Treasury yield stayed well above its July 2016 low for years\u2014until the Covid-19 pandemic began in 2020. On March 9, 2020, the 10-year Treasury yield notched an all-time low of 0.54% as investors panicked and global markets were thrown into chaos by the outbreak of the pandemic.

      \n

      How 10-Year Treasury Yields Work

      \n

      The U.S. Treasury issues 10-year T-notes at a face value of $1,000, and a coupon specifying a certain amount of interest to be paid every six months. The notes are sold to institutional investors, like banks and other financial companies, through auctions conducted by the Federal Reserve. Institutions then resell these notes to investors in the secondary market.

      \n

      It\u2019s the action in the secondary market that determines the yield. This is important to note because it\u2019s this rate that people refer to when they\u2019re talking about Treasuries. The coupon rate, while technically the interest rate you will receive in relation to the Treasury\u2019s face value, will likely be different from the effective yield you end up getting. If you pay less than face value, your effective rate will be higher; more and it will be lower.

      \n

      Prices (and therefore effective yields) change for bonds almost constantly. That\u2019s because a bond\u2019s price is inversely related to yield: When demand is high and Treasury prices rise, yields fall\u2014conversely, when demand is low Treasury prices fall and yields rise. This ebb and flow ultimately creates the Treasury pricing market as people flock to (and then from) Treasuries based on the economic environment they find themselves in.

      \n

      Remember, all U.S. Treasury securities are regarded as risk free\u2014since they\u2019re backed by the full faith and credit of the United States government, which has never defaulted on its debts. When investors get worried about the economy and market risk, they look for safe investments that preserve capital, and Treasuries are among the safest investments out there.

      \n

      One of the foundational principles of finance is that risk and return are correlated. When markets are booming and the economy is expanding, the appetite to take on risk and generate returns is high. Risk-free Treasuries become much less appealing because of their lower returns. Demand declines and Treasury notes sell at less than their face value.

      \n

      Why Is the 10-Year Treasury Yield Important?

      \n

      The 10-year Treasury yield serves as a vital economic benchmark, and it influences many other interest rates. When the 10-year yield goes up, so do mortgage rates and other borrowing rates. When the 10-year yield declines and mortgage rates fall, the housing market strengthens, which in turn has a positive impact on economic growth and the economy.

      \n

      The 10-year Treasury yield also impacts the rate at which companies can borrow money. When the 10-year yield is high, companies will face more expensive borrowing costs that may reduce their ability to engage in the types of projects that lead to growth and innovation.

      \n

      The 10-year Treasury yield can also impact the stock market, with movements in yield creating volatility. Rising yields may signal that investors are looking for higher return investments but could also spook investors who fear that the rising rates could draw capital away from the stock market. Falling yields suggest that corporate borrowing rates will also decline, making it easier for companies to borrow and expand, thus giving equities a boost.

      \n

      Global events can also have a significant impact on Treasury yields\u2014like the case of the U.K. referendum about E.U. membership mentioned above. U.S. government bonds are considered the safest investments anywhere in the world, and when geopolitical events create upheaval, Treasurys are often in high demand from international investors, leading to lower yields.

      \n

      Should You Invest in 10-Year Treasuries?

      \n

      There are good reasons to consider buying Treasuries. As we\u2019ve mentioned already, there\u2019s no safer investment anywhere.

      \n

      Coupon payments provide guaranteed income, and your investment will be safe regardless of what happens in the economy or the financial markets. Ten-year notes can offer a compromise between the extremely low payouts on T-bills and the higher risk having to hold onto longer-maturity T-bonds. As a bonus, most government bonds are not subject to state and local taxes, though you\u2019ll still owe federal taxes on any income you earn.

      \n

      Investors should aim to have some amount of bonds or other fixed income investments in their asset allocation to enhance portfolio diversification, so fixed income Treasuries may very easily have a home in your investing strategy. That said, how much space you allocate for them depends entirely on your age. A younger investor with a long-term horizon should have a much lower allocation to fixed income, particularly low-interest government bonds, than an investor who is much closer to retirement age.

      \n

      For individuals in retirement, the allocation to bonds should be significantly higher with a mix of higher-yielding bonds that can generate an income stream with lower-yielding bonds for capital preservation. Many retirees, particularly those who work with a financial advisor, can benefit from laddered bond portfolios that incorporate a variety of maturity dates to create a continuous stream of income.

      \n

      Consider Treasury ETFs

      \n

      Building a fixed income portfolio can be a complicated process. Investors interested in government bonds need not dive into the secondary market themselves. A multitude of index funds and exchange-traded funds (ETFs) offer fixed income exposure with varying levels of risk. Investors can choose funds that invest only in government securities or a total bond market index fund that invests in a highly diversified portfolio of bonds.

      \n

      While you may want to discuss investing in Treasury securities with your financial advisor, it\u2019s wise to pay attention to the 10-year Treasury yield. Whether you want to invest in the stock market, buy a house or a car or borrow money to build a company, the 10-Year Treasury rate exerts its influence on one and all.

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      \n\n\n", + "page_last_modified": "" + }, + { + "page_name": "The 10-year Treasury yield just crossed 5% for the first time since ...", + "page_url": "https://www.cnbc.com/2023/10/20/what-the-10-year-treasury-yield-crossing-5percent-means-for-you.html", + "page_snippet": "The government sets the annual rates on those loans once a year, based on the 10-year Treasury. If the 10-year yield stays above 5%, federal student loan interest rates could increase again when they reset in the spring, costing student borrowers even more in interest.The yield on the benchmark 10-year Treasury crossed 5% for the first time in 16 years on Thursday, causing a ripple effect that could raise rates on mortgages, student debt, auto loans and more. After Federal Reserve Chair Jerome Powell said \"inflation is still too high,\" expectations that the U.S. central bank could continue to tighten monetary policy sent the 10-year yield over the key psychological level for the first time since July 2007. There is also a correlation between Treasury yields and student loans. A college education is the second-largest expense an individual is likely to face in a lifetime, right after purchasing a home. To cover that cost, more than half of families borrow. A college education is the second-largest expense an individual is likely to face in a lifetime, right after purchasing a home. To cover that cost, more than half of families borrow. Undergraduate students who take out new direct federal student loans for the 2023-24 academic year are now paying 5.50% \u2014 up from 4.99% in the 2022-23 academic year and 3.73% in 2021-22. The government sets the annual rates on those loans once a year, based on the 10-year Treasury. If the 10-year yield stays above 5%, federal student loan interest rates could increase again when they reset in the spring, costing student borrowers even more in interest. The government sets the annual rates on those loans once a year, based on the 10-year Treasury. If the 10-year yield stays above 5%, federal student loan interest rates could increase again when they reset in the spring, costing student borrowers even more in interest. There is also a loose correlation between Treasury yields and auto loans.", + "page_result": "What the 10-year Treasury yield crossing 5% means for you
      Skip Navigation
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      Personal Finance

      The 10-year Treasury yield just crossed 5% for the first time since 2007. Here\u2019s what that means for you

      \"thumbnail\"/
      Jessica Dickler@jdickler
      \"thumbnail\"/
      Greg Iacurci@GregIacurci
      WATCH LIVE
      Key Points
      • The yield on the benchmark 10-year Treasury note, a key barometer for mortgage rates, auto loans and student debt, hit 5% for the first time since 2007 on Thursday.\u00a0
      • Borrowing costs could head even higher as a result.\u00a0
      • One group that\u00a0stands to\u00a0benefit from higher rates: savers.

      In this article

      \"Stock
      watch now
      VIDEO0:4800:48
      Stock futures slip as 10-year Treasury yield crosses 5% for the first time since 2007
      Morning Report

      The yield on the benchmark 10-year Treasury\u00a0crossed 5%\u00a0for the first time in 16 years on Thursday,\u00a0causing a ripple effect that could raise rates on mortgages, student debt, auto loans and more.

      After Federal Reserve Chair Jerome Powell\u00a0said\u00a0"inflation is still too high," expectations that the U.S. central bank could continue to tighten monetary policy sent the 10-year yield over the key psychological level for the first time since July 2007.

      "That has real impacts on the economy, ultimately affecting every individual in the U.S.," said Mark Hamrick, Bankrate.com's senior economic analyst.

      The yield on the 10-year note is a barometer for mortgage rates and other types of loans.

      "When the 10-year yield goes up, it will have a knock-on effect for almost everything," according to Columbia Business School economics professor Brett House.

      Even though\u00a0many of these consumer loans\u00a0are fixed,\u00a0anyone taking out a new loan will likely pay more in interest, he said.

      Why Treasury yields have jumped

      A bond's yield is the total annual return investors get from bond payments. There are many factors driving the recent spike in Treasury yields, economists said.

      For one, yields tend to rise and fall according to the Federal Reserve's interest rate policy and investors' inflation expectations.

      In this case, the central bank has hiked its benchmark rate aggressively since early 2022 to tame historically high inflation, pushing up bond yields. Inflation has fallen significantly since then. However, Fed officials and recent strong U.S. economic data suggest interest rates will likely have to stay higher for a longer time than many expected to finish the job. Higher oil prices have also fed into inflation fears.

      But interest rates are just part of the story.

      Most of the recent jump in Treasury yields is due to a so-called "term premium," said Andrew Hunter, deputy chief U.S. economist at Capital Economics.

      Basically, investors are demanding a higher return to lend their money to the U.S. government \u2014 in this case, for 10 years. One reason: Investors seem skittish about rising U.S. government debt, Hunter said. Generally, investors demand a higher return if they perceive a greater risk of the government's inability to pay back debt in the future.

      Mortgage rates will stay high

      Most Americans' largest liability is their\u00a0home mortgage. Currently, the average 30-year fixed rate is up to 8%, according to Freddie Mac.

      "For those who are planning to buy a home, this is really bad news," said Eugenio Aleman, chief economist at Raymond James.

      "Mortgage rates will probably continue to go up and that will push affordability farther away."

      Student loans could get pricier

      There is also a correlation between Treasury yields and\u00a0student loans.

      A college education is the second-largest expense an individual is likely to face in a lifetime, right after purchasing a home. To cover that cost,\u00a0more than half of families borrow.

      Undergraduate students who take out new direct federal student loans for the 2023-24 academic year are now paying 5.50% \u2014 up from 4.99% in the 2022-23 academic year and 3.73% in 2021-22.

      The government sets the annual rates on those loans once a year, based on the\u00a010-year Treasury.

      If the 10-year yield stays above 5%, federal student loan interest rates could increase again when they reset in the spring, costing student borrowers even more in interest.

      Car loans are getting more expensive

      There is also a loose correlation between Treasury yields and\u00a0auto loans. The average rate on a five-year new car loan is currently 7.62%, the highest in 16 years, according to Bankrate. Now, more consumers face monthly payments that they likely cannot afford.

      "There are only so many people who can carve out an $800 to $1,000 car payment," Bankrate's Hamrick said.

      More from Personal Finance:
      The inflation breakdown for September 2023 \u2014 in one chart
      Social Security cost-of-living adjustment will be 3.2% in 2024
      Lawmakers take aim at credit card debt, interest rates, fees

      While other types of borrowing, including credit cards, small business loans and home equity lines of credit, are predominantly\u00a0pegged to the federal funds rate\u00a0and rise or fall in step with Fed rate moves, those rates could head higher, too, according Aleman.

      "Everything from business loans to consumer loans is going to be affected," he said.

      Savers can benefit

      One group that does stand to\u00a0benefit from higher yields\u00a0is savers.

      "For many years, we've been bemoaning the plight of savers," Hamrick said. But because yields tend to be correlated to changes in the target federal funds rate, deposit rates are finally higher.\u00a0

      High-yield savings accounts, certificates of deposits\u00a0and money market accounts are now paying over 5%, according to Bankrate, which is the\u00a0most savers have been able to earn\u00a0in more than 15 years.

      "This is the rare time in recent history when cash looks pretty good," Hamrick said.

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      ", + "page_last_modified": "" + } + ] +} \ No newline at end of file