About this indicator
About
The 10-year Treasury yield is the implied annual return an investor would earn holding a U.S. government note to maturity. The U.S. Treasury auctions new 10-year notes in February, May, August, and November, with reopenings of the same security in the off-months. The yield trades continuously in the secondary market and is quoted by Treasury Direct, Bloomberg, and ICE. Macro models treat it as the benchmark long-term safe rate for the dollar economy.
Why it matters
Mortgage rates, corporate bond yields, and the discount rate used in equity valuation all reference the 10-year. The spread between the 10-year and the 3-month or 2-year Treasury has predicted every U.S. recession since 1969 with one false positive (the brief inversion in 1966). Foreign holdings of 10-year notes are a barometer of dollar reserve demand; changes in Japanese, Chinese, or Saudi positioning move the yield curve.
How it's computed
The on-the-run yield refers to the most recently auctioned 10-year note. Daily benchmarks come from the Fed's H.15 release, which is a 4 p.m. ET market quote. The constant maturity Treasury (CMT) yield is interpolated from a yield curve fit to all outstanding Treasuries, which makes it a smoother long-run series than the on-the-run yield. TIPS yields plus breakeven inflation decompose the nominal 10-year into a real rate and an inflation expectation.
Pitfalls
The 10-year yield can fall because growth expectations weakened, because inflation expectations fell, or because the term premium compressed. The three sources have different policy implications. The New York Fed's ACM model decomposes the yield into these three pieces. Treating a 10-year move as a single story is a common analyst error.