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What is a 10-year Treasury bond?

Proceeds from the sale of Treasury bonds go hand in hand with tax revenues to help the federal government finance its operations and repay outstanding U.S. debt. As a longer-term bond, the 10-year Treasury bond is also used as a gauge for investor sentiment on the economy.

What's going on with 10-year bond yields?

Yields on 10-year bonds – the interest rate at which the government borrows – shot up above 4%, and continued to climb through Tuesday, hitting 5% – the highest level since the financial crisis of 2008. Bond yields climb when bond prices fall.

How does a 10-year bond work?

First is a small interest payment fixed for the bond's lifetime – currently a 0.13 percent coupon for a 10-year bond, according to Bob Johnson, CEO of The American College of Financial Service in Bryn Mawr, Pennsylvania. Then there is a semi-annual inflation adjustment, a sum added to the bond's principal to equal to the current inflation rate.

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