What is the 10-year Treasury yield?

The 10-year Treasury yield is the annualized return an investor receives for holding a US government bond that matures in 10 years. Because the US Treasury is considered the safest borrower in the world, this yield functions as the global risk-free rate and serves as a benchmark for pricing trillions of dollars in financial assets.

Mortgage rates in the United States are most closely tied to the 10-year yield rather than the federal funds rate. When the 10-year yield rises, 30-year fixed mortgage rates typically follow, increasing the cost of homeownership and cooling the housing market. Corporate bond yields, auto loan rates, and student loan rates also reference Treasuries, making this single number a key driver of borrowing costs across the entire economy.

The 10-year yield is determined by supply and demand in the Treasury market. Demand comes from domestic and foreign investors, central banks, pension funds, and banks seeking safe collateral. Supply comes from the US government, which issues new debt to finance budget deficits. When the government runs large deficits and auctions more bonds, yields tend to rise, all else equal.

Several forces drive the 10-year yield at any given moment: expected future short-term rates (tied to Fed policy), inflation expectations, the term premium (compensation for duration risk), and global capital flows. A key decomposition is that the 10-year yield roughly equals the average expected short-term rate over the next decade plus the term premium.

For equity investors, the 10-year yield matters because it is the discount rate used in valuation models. When yields rise, the present value of future corporate earnings falls, putting downward pressure on stock prices, particularly for long-duration growth stocks. The relationship between the 10-year yield and equity valuations is one of the most important dynamics in modern financial markets.