New yield? Yes, but not in a good way. I wrote this post last Monday when the U.S. 10- year Treasury closed with a rate of just 1.52%. One year earlier, it closed at 2.72% What exactly does this mean and what impact does it have?
For starters, a 10-year Treasury note is a loan made to the U.S. Government. Think of it like a person getting a loan from the bank, but in reverse. For loaning this money the purchaser in return will receive a fixed rate of interest. 10-year Treasury notes are considered an extremely safe investment due to backing of the full faith and credit power of the government.
The notes are purchased at initial auction or on the secondary market and sold to the highest bidder. This happens daily. When investors are looking for safety and the notes are in high demand they may be sold at higher than face value. This reduces the overall the Yield of the investment.
What affect does that have on you? I can be both good and bad at the same time. 10-year Treasury note yield is a benchmark for other interest rates. If the yield goes up, the interest rates on 10 and 15 year fixed rate mortgages do as well. This means if you decide to buy a home and get a loan, you would end up paying a higher rate to borrow that money. If rates are lower then you would be paying less.
However, if the 10-year Treasury note is low, other investment that may be less safe can also fall and remain competitive.
Lastly, the 10-year Treasury rate compared with other rates can be an indicator of sentiment on the economy. If investors aren’t confident, they will seek safety. As the 10-year treasury is virtually risk-free, a higher demand will drive down the rate.
This means investors are less confident in the economy now than they were a year ago.
“Our greatest glory is not in never failing, but in rising every time we fall.”
-Confucius
My Two Cents 
I had no clue the yield rates had changed or what it all even meant before reading this post. Thank you so much for explaining it really well and helping it make sense. I look forward to continue researching more about this topic now.
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