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Chrishaune

Chrishaune

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Let's learn boys and girls.


Why the 10-Year U.S. Treasury Yield Matters

Why the 10-Year U.S. Treasury Yield Matters




    • Treasury securities are loans to the federal government. Maturities range from weeks to as many as 30 years.
    • Because they are backed by the U.S. government, Treasury securities are seen as a safer investment relative to stocks.
    • Bond prices and yields move in opposite directions—falling prices boost yields, while rising prices lower yields.
    • The 10-year yield is used as a proxy for mortgage rates. It's also seen as a sign of investor sentiment about the economy.
    • A rising yield indicates falling demand for Treasury bonds, which means investors prefer higher-risk, higher-reward investments. A falling yield suggests the opposite.
Why Is the 10-Year Treasury Yield So Important?

The importance of the 10-year Treasury bond yield goes beyond just understanding the return on investment for the security. The 10-year is used as a proxy for many other important financial matters, such as mortgage rates.


This bond also tends to signal investor confidence. The U.S Treasury sells bonds via auction and yields are set through a bidding process.5 When confidence is high, prices for the 10-year drop and yields rise. This is because investors feel they can find higher-returning investments elsewhere and do not feel they need to play it safe.


But when confidence is low, bond prices rise and yields fall, as there is more demand for this safe investment. This confidence factor is also felt outside of the U.S. The geopolitical situations of other countries can affect U.S. government bond prices, as the U.S. is seen as safe haven for capital. This can push up prices of U.S. government bonds as demand increases, thus lowering yields.

Another factor related to the yield is the time to maturity. The longer the Treasury bond's time to maturity, the higher the rates (or yields) because investors demand to get paid more the longer their money is tied up. Typically, short-term debt pays lower yields than long-term debt, which is called a normal yield curve. But at times the yield curve can be inverted, with shorter maturities paying higher yields.


Changing Yields Over Time

Because 10-year Treasury yields are so closely scrutinized, knowledge of its historical patterns is integral to understanding how today's yields fare as compared to historical rates. Below is a chart of the yields going back a decade.

While rates do not have a wide dispersion, any change is considered highly significant. Large changes of 100 basis points over time can redefine the economic landscape.


Perhaps the most relevant aspect is in comparing current rates with historical rates, or following the trend to analyze whether near-term rates will rise or fall based on historical patterns. Using the U.S. Treasury website, investors can easily analyze historical 10-year Treasury bond yields.
Click to expand...




In other words, get out of your risky investments when the 10 year treasury yield is falling, or you can short or buy PUT options.

When the treasury yield goes up maybe take a chance.:ehh:



hint: It's been trending down for the last 2 months.
 
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Rickdogg44

Rickdogg44

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Chrishaune said:
Let's learn boys and girls.


Why the 10-Year U.S. Treasury Yield Matters






In other words, get out of your risky investments when the 10 year treasury yield is falling, or you can short or buy PUT options.

When the treasury yield goes up maybe take a chance.:ehh:



hint: It's been trending down for the last 2 months.
Click to expand...
I thought 10 year going up killed growth names?
 
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