Treasury Yields
A Treasury yield is the annualized return from holding a U.S. government bond to maturity. The 10-year yield is treated as the "risk-free rate" for pricing assets worldwide, while the 2-year yield most directly reflects the market's expectations for Federal Reserve interest rates.
How to read it
Rising yields push stock valuations down, especially for high-P/E growth stocks: future profits are worth less when discounted back to today.
The 10-year yield minus the 2-year yield is called the term spread. A negative spread (an inverted yield curve) has historically often shown up ahead of recessions.
Bond prices and yields move in opposite directions: a rising yield means falling bond prices.
Common pitfalls
- Why yields are rising matters more than the fact that they are. Rising because the economy is strong is not necessarily bad for stocks; rising because inflation is out of control is.
On FinDog
The right-hand column of the Daily Wrap shows the 2-year, 10-year and 30-year Treasury yields and their change on the day, every day. Data comes from the U.S. Treasury Department.
Read today's Daily Wrap →Related terms
- P/E RatioThe P/E ratio is the share price divided by earnings per share, which is the same as market cap divided by net income. It tells you how many years of earnings at the current level it would take to earn back the purchase price. TTM means the calculation uses trailing-twelve-month earnings.
- VIXThe VIX is derived from the prices of S&P 500 index options and reflects how much volatility the market expects over the next 30 days, on an annualized basis. The higher the reading, the more investors are willing to pay for insurance.