The price of time
What the 10-year Treasury yield is, and why a bond’s price moves when rates do.
The US 10-year Treasury yield, monthly, Jan 1962 – Sep 2026 · today, 5.29% · shaded: nothing higher since May 2002 · FRED, DGS10The 10-year yield since 1962 · today 5.29%, highest since 2002
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01 the map
The map.
One number, six forces pushing on it, seven places it reaches.
The US government borrows by selling IOUs called Treasuries. The US 10-year Treasury note is one: a ten-year loan to the government. It pays interest every year, then returns your money, and you can sell it to another investor at any time. Its yield is the yearly return from buying it at today’s price and holding it to the end, as a percentage: the going rate for lending to the US government for ten years. (It is close to, but not the same as, the interest printed on the note; section 02 shows the difference.) When it rises, new lenders earn more, the government pays more on new borrowing, and holders of older, lower-rate notes earn less than the market. On 30 September 2026 it closed at 5.29%, the highest since 14 May 2002.1 Commentary calls it a 24-year high, a parabolic move, a danger zone. Underneath is a machine with three parts: what pushes the yield, what it is made of, and what it pushes.
The machine takes seven short notes, one part at a time. This is the first:
| note | what it covers |
|---|---|
| 1.1 The price of time | this map; what a bond is, and why its price moves when rates do |
| 1.2 Why the 10-year | the Fed sets the short end, lenders set the long end |
| 1.3 What a yield is made of | the river’s three bands: expected rates, expected inflation, the term premium |
| 1.4 What pushes the yield | the six springs, and the times they pushed hardest |
| 1.5 Where the yield ripples | the seven mouths, and why the same rise can be good or bad |
| 1.6 Reading the yield today | who can push back, a yield you build, why 5.3%, what to watch |
| 1.7 Hedging with bonds | why investors hold Treasuries as a cushion, and when it fails |
FIG 1 draws the machine as a river. Six springs on the left are the causes. Their streams, inked by the part of the yield they feed, join one river, the 10-year, which spreads into a delta; each mouth is a place the yield reaches. Click any spring, band or mouth for its card: what it is, what moves it each way, and which note covers it.
FIG 1 · six springs, one river, seven mouths, two currents back
the 10-year yieldthe middle of the map
- what
- What the market charges to lend to the US government for ten years: the benchmark every long-term rate is quoted against.
- now
- 5.29% on 30 Sep 2026, the highest close since May 2002
- parts
- expected real rate + expected inflation + term premium; click each
- more
- note 1.1: a bond is a loan you can sell
Two loops matter as much as the arrows. The debt loop feeds itself: a higher yield raises the government’s interest bill, which widens the deficit (the gap when the government spends more in a year than it collects in taxes, filled by borrowing), which means more bonds to sell. The brake corrects itself: a higher yield makes borrowing costlier for everyone, which slows the economy, which lowers the rates people expect and pulls the yield back down. Which loop is winning explains most big moves.
02 a loan you can sell
A bond is a loan you can sell.
The payments are fixed. The price moves. The yield is what links them.
What a bond is
Start with an ordinary loan. A friend borrows $1,000 today and repays it later. You can’t use the money meanwhile, so you ask for a little extra for the wait: interest. As a percentage of the loan per year, it is the interest rate.
A bond is such a loan, written as a formal promise that can be sold to someone else. US government bonds are called Treasury securities, or Treasuries: bills last up to a year, notes two to ten years, and bonds twenty or thirty.2
Every note carries three numbers that never change:
| the number | what it means | our example |
|---|---|---|
| face value | what you get back at the end | $1,000 |
| coupon | the yearly interest, as a percentage of the face value | 4%, which is $40 a year |
| maturity | the date you are repaid | ten years from now |
It pays you:
| when | you receive |
|---|---|
| every year, for ten years | $40 |
| at the end of year ten | your $1,000 back |
| in total | $1,400 |
The note never grows: each $40 is paid out, and the $1,000 stays $1,000. Spending or relending the $40 is up to you.
Selling it: why the price moves
You can sell the note to another investor at any time; what they pay is its price. Treasuries trade every working day.
Why would the price differ from $1,000?
Because rates change. Say you bought when ten-year lending paid 4%. On 30 September 2026 it paid 5.29%: a new $1,000 note paid $52.90 a year. A buyer can choose:
| a new note | your old note | |
|---|---|---|
| pays each year | $52.90 | $40 |
| pays at the end | $1,000 | $1,000 |
Nobody will pay $1,000 for yours. The sale, step by step:
| step | what happens | the number |
|---|---|---|
| one | your note pays less each year than a new note | $12.90 a year less |
| two | so you lower the price until the buyer does exactly as well as with a new note | about $902 |
| three | the buyer still gets your $40 a year | $40 a year |
| four | at the end the buyer gets $1,000 back for what they paid | a gain of $98 |
| five | the smaller yearly pay plus that gain, as a yearly return | 5.29%, the same as a new note |
That return, from buying at today’s price and holding to the end, is the yield. An old note’s price moves until its yield equals what new notes pay.
It works both ways
Now a friend’s older note pays 6%, $60 a year: more than a new note’s $52.90, so buyers pay more than $1,000 for it. All three notes, each with ten years left and $1,000 back at the end:
| your note | a new note | your friend’s note | |
|---|---|---|---|
| coupon | 4% | 5.29% | 6% |
| pays each year | $40 | $52.90 | $60 |
| against a new note | $12.90 a year less | the same | $7.10 a year more |
| price today | about $902 | $1,000 | about $1,054 |
| at the end: $1,000 back, against the price paid | $98 more than they paid | the same as they paid | $54 less than they paid |
| the yearly pay against a new note, over ten years, in plain dollars | $129 less | the same | $71 more |
| the yearly pay against a new note, over ten years, in today’s dollars | $98 less | the same | $54 more |
| overall | even | even | even |
| the buyer’s yield | 5.29% | 5.29% | 5.29% |
| the seller | loses $98 | – | gains $54 |
Is the buyer of your friend’s note losing $54?
No. The final $1,000 is half the deal; the yearly pay is the other half. In today’s dollars the two cancel, so the deal is even.
Every buyer earns 5.29%, whichever note they buy; the price is the dial that makes it so. A note paying less than the market sells below $1,000; one paying more sells above. Lower price, higher yield. Higher price, lower yield.
Coupon and yield are not the same
The easiest thing in bonds to mix up. The coupon is the interest printed on the note when it is first sold; it never changes. The yield is what a buyer earns at today’s price; it changes daily. For the buyer of your friend’s note:
| for the buyer of your friend’s note | |
|---|---|
| the coupon | 6%: $60 a year, counted on the $1,000 face value. It never changes. |
| the price they paid | $1,054 |
| at the end | $1,000 back: $54 less than they paid |
| their yield | 5.29%: what they really earn, counting the price they paid and the $1,000 at the end |
On a new note, sold near face value, coupon and yield are about equal. “The 10-year yield” in the news means what a lender earns today, not the coupon on any one note.
Money later is worth less than money now
Working out a price like $902 takes one more idea. $100 today beats $100 in a year, because today’s $100 can be lent and grow. At 5.29%, earning interest on its interest:
| after | $100 lent today grows to |
|---|---|
| one year | $105.29 |
| two years | $110.86 |
| ten years | $167.44 |
| thirty years | $469.48 |
Each year multiplies by 1.0529. Run it backwards, dividing by 1.0529 for each year of waiting, and you get what money due later is worth now. That is discounting; the answer is the value in today’s dollars.
| $100 paid to you in | is worth today |
|---|---|
| one year | $94.98 |
| two years | $90.20 |
| ten years | $59.72 |
| thirty years | $21.30 |
Check: lend $94.98 today at 5.29% and in a year you have $100. Money further away is worth less today, because today’s money has longer to grow. A higher rate makes it worth less still, because today’s money grows faster.
A bond pays its interest out and never grows. So why grow anything?
Because each payment, when it arrives, could be lent again at today’s rate. Discounting asks, for each payment:
How much would I put aside today, untouched, to have exactly this payment on that date?
The growing happens in that imaginary deposit, not in the bond. (Rates change, so money may be relent at a different rate: reinvestment risk.)
A price is its payments in today’s dollars
A bond’s price is all its payments in today’s dollars, added up. A 2-year 4% note, with the market at 5.29%:
| payment | when | divide by | worth today |
|---|---|---|---|
| $40 | after one year | 1.0529 | $37.99 |
| $40 plus the $1,000 back | after two years | 1.0529 × 1.0529 = 1.1086 | $938.12 |
| price | $976.11 |
A new 2-year note paying $52.90 a year adds up to exactly $1,000: a note paying the market rate sells at face value, which checks the method. The same table as one formula, for any length:
price = c/(1+y) + c/(1+y)2 + … + (c + $1,000)/(1+y)n
c is the yearly coupon in dollars ($40 here), y the yield as a decimal (5.29% is 0.0529), n the years left, and $1,000 the face value. A spreadsheet does it in one step.
So “bonds sold off” (holders sold, prices fell) and “yields jumped” describe the same day. FIG 2 is a note you can change. Each bar is one payment; the filled part is its value today. Raise the yield and every filled part shrinks, the far ones most.
Longer bonds swing more
Your note lost value because you are stuck earning less than new lenders. The longer you are stuck, the more you lose. Three 4% notes, with the market at 5.29%:
| 4% note | stuck with the old rate for | price today | you lost |
|---|---|---|---|
| 2-year | two years | $976 | $24 |
| 10-year | ten years | $902 | $98 |
| 30-year | thirty years | $808 | $192 |
A bad deal that ends in two years barely hurts; one locked in for thirty hurts a lot. In reverse, when rates fall, the long bond gains most.
Why is the 30-year loss $192, not thirty times the $12.90 shortfall?
The buyer pays today, but the shortfall arrives yearly. So each year’s shortfall is turned into today’s dollars, what you would put aside today to cover it:
| the shortfall in year | in plain dollars | put aside today to cover it |
|---|---|---|
| one | $12.90 | $12.25 |
| two | $12.90 | $11.64 |
| ten | $12.90 | $7.70 |
| thirty | $12.90 | $2.75 |
| all thirty years added up | $387 | $192 |
Far-off years need little today, because that money has decades to grow. Both totals are right, in different units: plain dollars spread over thirty years, and today’s dollars, which is what the buyer pays in.
How long you are stuck is a bond’s duration: roughly the average wait, in years, for its payments, each counted at its value today. Yield moves are measured in percentage points, or points: 4% to 5% is one point. Rule of thumb: a one-point rise in yields cuts a bond’s price by about its duration, in percent. Switch FIG 2 between 2, 10 and 30 years to see the drop grow. Anything whose value lies far ahead has a long duration, including a company whose profits are mostly years away (note 1.5).
Selling doesn’t create the loss
The loss happens when rates move, not when you sell. When the yield rose to 5.29%, your 4% note became worth about $902 to anyone: you are $98 poorer, sold or not. The two choices are worth the same:
| hold the note | sell the note | |
|---|---|---|
| what you get | $40 a year for ten years, then $1,000 | $902 now, which you can lend at 5.29% |
| the loss | taken slowly: $12.90 a year less than new lenders, for ten years | taken all at once: $98 |
| worth today | about $902 | $902 |
Holding spreads the loss out; selling makes it realised, locked in for good. In reverse, your friend is $54 richer the day rates drop, sold or not. Whatever rates did is already in the price.
Selling matters when you need the cash, expect rates to move again, or for taxes and accounts. A holder forced to sell, or required to value holdings at today’s price (as banks and funds often are), feels the loss at once; note 1.5 shows how that can sink a bank. A rise in yields moves wealth from those who have lent to those about to lend.
One unit: the basis point
A basis point is a hundredth of a percentage point, used because daily moves are small. “The 10-year fell 5 basis points” means 5.29% became 5.24%.
03 the words
The words in this note.
Every term this note defines, in the order it appears.
| word | what it means |
|---|---|
| interest, interest rate | The extra a borrower pays for using your money. As a percentage of the loan, per year, it is the interest rate. |
| bond | A loan written down as a promise: interest along the way, and the money back on a set date. |
| Treasuries | Bonds sold by the US government: bills (a year or less), notes (two to ten years) and bonds (twenty or thirty years). |
| 10-year Treasury note | A ten-year loan to the US government that pays interest every year and can be sold to another investor at any time. Its yield is the benchmark for long-term rates. |
| face value | The amount repaid at the end, counted in blocks of $1,000. |
| coupon | The fixed interest paid each year, as a percentage of the face value. Set when the note is first sold; it never changes. |
| maturity | The day a bond is repaid; also how long it has left to run. |
| price | What a buyer pays for a bond today. It can be more or less than the face value. |
| yield | The yearly return from buying a bond at today’s price and holding it to the end. Not the coupon: the coupon is fixed, the yield moves with the price. When the price falls, the yield rises. |
| discount | To work out what money due later is worth today. Money later is worth less than money now. |
| reinvestment risk | The risk that money paid back must be lent again at a lower rate. |
| duration | The average wait, in years, for a bond’s payments. Roughly how many percent its price falls when yields rise one point. |
| percentage point | The plain gap between two percentages: from 4% to 5% is one point. |
| basis point | A hundredth of a percentage point. |
| realised loss | A loss locked in by selling. |
| debt loop | Higher yields mean a bigger interest bill, so bigger deficits, more bonds to sell, and higher yields again. It can feed itself. |
| the brake | Higher yields make borrowing cost more, which slows the economy and pulls expected rates, and so yields, back down. It corrects itself. |
| deficit | The gap when the government spends more in a year than it collects in taxes, filled by borrowing. |
Every term in the notebook, with the note that explains it, is in the notebook’s glossary.
sources read 2026-10-01
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Sources · 4 references
Every series was downloaded from FRED on 1 October 2026 (unadjusted CPI on 2 October), and the filings from EDGAR the same day; both are kept as a snapshot with the post. Every number on the page is computed from that snapshot or quoted from the sources below. Each source is marked peer-reviewed or not. Nothing here is advice: the post explains; it does not recommend.
- Board of Governors of the Federal Reserve System (2026). Selected Interest Rates (H.15): market yields on US Treasury securities at constant maturity, 1-month to 30-year (DGS1MO … DGS30), 10-year TIPS (DFII10), the federal funds target range (DFEDTARL, DFEDTARU; DFEDTAR before 2008) and the effective rate (FEDFUNDS); the broad dollar index (DTWEXBGS, H.10). Retrieved from FRED, Federal Reserve Bank of St. Louis, 1 October 2026. Data, not peer-reviewed. fred.stlouisfed.org/series/DGS10
- US Department of the Treasury (2026). Treasury bills, notes and bonds. TreasuryDirect. The maturities of each kind of security, and the adjustment of TIPS principal by the BLS consumer price index (checked 6 October 2026). Not peer-reviewed. treasurydirect.gov/marketable-securities
- Kim, D.H. and Wright, J.H. (2005). An arbitrage-free three-factor term structure model and the recent behavior of long-term yields and distant-horizon forward rates. Finance and Economics Discussion Series 2005-33, Federal Reserve Board. The model behind the term premium used here; the Fed’s updated estimate is FRED’s THREEFYTP10. A working paper, not peer-reviewed. federalreserve.gov/pubs/feds/2005/200533
- Federal Reserve Bank of St. Louis (2026). 10-year breakeven inflation rate (T10YIE): the 10-year Treasury yield minus the 10-year TIPS yield. FRED, retrieved 1 October 2026. Data, not peer-reviewed. fred.stlouisfed.org/series/T10YIE
To verify before publication: Costco’s 30 September close against Koyfin. Checked against their own pages on 2 October 2026: the FOMC statement of 16 September 2026, the BLS releases for August 2026, the Treasury’s statements of 2 August and 1 November 2023, the Bank of England’s case study, the Federal Reserve History essay, and every series against a fresh recomputation. Not sourced, and so not stated as numbers: the market-implied odds of a hike, and the average maturity of the government’s debt.
documentation
- FRED: the 10-year Treasury yield (DGS10): The series the post is about, daily since 1962, from the Fed's H.15 release.
- TreasuryDirect: marketable securities: What bills, notes and bonds are, and how long each lends for.
- the Federal Open Market Committee: Where the Fed sets the federal funds rate: its meetings, statements and projections.
- TreasuryDirect: TIPS: Treasury Inflation-Protected Securities, whose yield is a real yield.
- the Kim–Wright term structure model: The Fed's page for the model and its published term premium estimates.