What pushes the yield
Six forces, the part of the yield each one pushes, and the times they pushed hardest.
The US 10-year Treasury yield, monthly, Jan 1962 – Sep 2026, with the episodes this note takes apart · FRED, DGS10The 10-year since 1962, five episodes shaded · FRED
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Builds on note 1.3, What a yield is made of. Every term is defined where it first appears, and the words this note defines are collected at the end.
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01 what pushes it
What pushes it.
Six forces, and the parts of the yield each one pushes.
What pushes each part of the 10-year:
| force | the part it pushes |
|---|---|
| 1. the Fed’s path | the expected path |
| 2. inflation | the breakeven; the expected path, through the Fed |
| 3. growth and investment | the real yield, through the expected path |
| 4. the supply of bonds | the term premium |
| 5. who buys | the term premium |
| 6. uncertainty | the term premium |
Each force in turn, then this year’s numbers against all six at the end.
1. The Fed’s path
The Fed sets today’s overnight rate; the 10-year depends on what lenders expect it to do over ten years, the expected path (note 1.3). So the 10-year can move as much on a speech or a jobs report (the government’s monthly count of jobs added and of unemployment) as on a decision, because new information changes the forecast:
| the news | what lenders now expect | the 10-year |
|---|---|---|
| either strong hiring, or inflation that won’t come down | rates staying higher for longer | up |
| either weak hiring, or inflation cooling | cuts sooner | down |
Each row is two separate pieces of news; either moves the 10-year the same way. Strong hiring is not the opposite of inflation but one of its causes: more jobs and pay rises mean more spending, and spending that outgrows what the economy can make raises prices.
The 2-year yield is the cleanest read of the Fed’s next two years. This year it rose from 3.60% to 4.88%, as lenders went from expecting cuts to getting a hike.1
A Fed decision is often old news on the day: priced in (note 1.2). Traders bet on each decision with futures, contracts that pay according to where the federal funds rate ends up, so their prices show the market’s odds. The yield moves on the surprise.
2. Inflation
Inflation (note 1.2) is a lender’s enemy: it makes each dollar repaid later buy less. So lenders who expect more of it ask a higher yield. It reaches the 10-year two ways:
| route | how it works | the part it pushes |
|---|---|---|
| directly | lenders want more pay for the inflation they expect | the breakeven |
| through the Fed | the Fed raises rates to fight inflation | the expected path |
Prices rise for three main reasons:
| cause | how it works | an example |
|---|---|---|
| too much spending | buyers want more than the economy can make, so sellers raise prices | strong hiring (section 1): more pay, so more spending |
| costs going up | making things costs more, and companies pass the extra cost on in their prices | oil, wages |
| expecting it | when people expect prices to rise, workers ask for bigger raises and shops raise prices early, so the rise comes true | the 1970s (FIG 1) |
This year’s cause: oil. Oil is a cost, and it spreads fastest, because energy goes into almost everything: fuel for trucks and planes, power for factories, heating, plastics. When oil jumps, many prices rise at once.
In 2026 the shock came from war. The war involving Iran began on 28 February and choked shipping through the Strait of Hormuz, the narrow channel out of the Persian Gulf that carries about a fifth of world oil consumption and a quarter of seaborne oil trade. Brent crude is the main world benchmark price for a barrel of oil:511
| when | Brent crude, a barrel | what was happening |
|---|---|---|
| 27 February 2026, the last day before the war | $71 | – |
| 7 April | $138, the peak | shipping through the strait choked |
| early July | $69 | supply recovered |
| mid-September | $131 | strikes resumed |
| 29 September | $114 | – |
Oil reaches the breakeven (the yearly inflation lenders expect over the next ten years, note 1.3) two ways:
| route | how it works | effect on the 10-year breakeven |
|---|---|---|
| through TIPS | TIPS are adjusted by the CPI, which includes energy, so an oil jump raises what TIPS pay at once2 | small: the jump lasts months, and the breakeven averages ten years |
| through expectations | lenders expect higher oil to last, or to spread into wages and other prices | large, but only if lenders believe it |
What that oil did to inflation (the rise in prices over twelve months, by the CPI) and to the breakeven:456
| before the war | at the peak | latest | |
|---|---|---|---|
| inflation | 2.4% (February) | 4.2% (May) | 3.4% (August) |
| the breakeven | 2.25% (27 February) | 2.50% (4 May) | 2.36% (30 September) |
Oil nearly doubled; the breakeven barely moved and gave most of its rise back: lenders expect the shock to pass, so the second route stayed weak. So this year inflation reached the 10-year mostly through the Fed, which hiked in September (note 1.2).
it happened before · oil shocks
January 1979: revolution in Iran cuts its oil output. WTI goes from $14.85 a barrel in December 1978 to $39.50 by April 1980, and inflation peaks at 14.8% in March 1980. Paul Volcker, Fed chair from August 1979, lets the federal funds rate climb to a monthly average of 19.1% in June 1981; the 10-year peaks at 15.84% on 30 September 1981.15612 Two recessions follow, and so do two decades of falling inflation and falling yields.
A rise in costs is the hardest inflation for the Fed. An oil shock is a supply shock: it makes production costlier, so prices rise and growth slows at once, the stagflation box in note 1.2, and the Fed must choose which to fight. FIG 1 shows the two big oil shocks before this one:1612
| 1979–81 | 2022 | |
|---|---|---|
| what started it | the revolution in Iran cut its oil output | Russia invaded Ukraine |
| oil before, and at its peak | $14.85 → $39.50 a barrel (WTI, the US benchmark) | $77 → $133 a barrel (Brent) |
| inflation at its peak | 14.8% | 9.1% |
| what the Fed did | let its overnight rate climb to 19.1% (the average for June 1981) | raised rates from near zero, faster than at any time since the 1980s |
| the 10-year at its peak | 15.84% (30 September 1981) | 4.25% (October 2022) |
| what it cost | two recessions | inflation fell through 2023 without a recession |
Why did 1979–81 and 2022 end so differently?
The third cause in the table above: expectations. In 1979 people had stopped believing the Fed would bring inflation down, and changing their minds took rates near 20% and two recessions. In 2022 they still believed it. Today the breakeven is back near its pre-war level: so far, lenders expect the Fed to contain this shock too.
3. Growth and investment
Interest is the price of borrowing, and like any price it rises when more people want the same thing. Lenders have a pool of savings to lend. In a boom, firms borrow to build and households borrow to spend, all from that same pool:
| in a boom | what it does to rates |
|---|---|
| firms borrow to build factories, offices and data centers | more demand for the same savings |
| households borrow to buy homes and cars | more demand still |
| firms expect new projects to earn a lot | so they can afford to pay more, and lenders ask more |
| the Fed keeps its rate up so the boom doesn’t turn into inflation | the expected path rises |
So strong investment raises the real rate: the price of money itself, not pay for inflation. Today’s boom is the build-out of AI data centers and the power plants behind them; the Fed called capital investment “robust” in September.9
A rise in yields that comes from growth is the kind stocks (shares, each a small slice of ownership in a company) have more often risen through, because the same growth lifts profits. note 1.5’s FIG 2 shows yields and stocks rising together in most months from 2000 to 2021. FIG 2 shows the last big boom, and how it ended.
it happened before · an investment boom
The late-1990s boom in computing and the internet. Yields and the Fed’s rate rose for more than a year while technology stocks kept climbing; then the stocks crashed. Numbers in the table below.
What it shows: rising yields did not end the rally, a long run of rising prices, for over a year, but they raised the bar for the most expensive, most distant profits. A precedent, not a forecast: that boom had no oil shock and a different Fed, and its peak was clear only afterwards.
The Nasdaq Composite is an index, one number tracking the combined prices of many stocks; it covers the companies listed on the Nasdaq exchange, heavy in technology. The boom and the bust, in order:1720
| when | what happened | the numbers |
|---|---|---|
| Oct 1998 – Jan 2000 | yields rise, and stocks rise faster | the 10-year 4.16% → 6.79%; the Nasdaq 1,537 → 4,190, up 173% |
| Jun 1999 – May 2000 | the Fed hikes to cool the boom | its target 4.75% → 6.5% |
| 10 Mar 2000 | the Nasdaq peaks | 5,049 |
| Mar – Nov 2001 | a recession | dated by the NBER |
| 2001 | the Fed cuts to fight the slowdown | 11 cuts, 6.5% → 1.75% |
| 9 Oct 2002 | the Nasdaq bottoms | 1,114: down 78% from the peak; the 10-year 3.61% |
If the investment was real, why did stocks crash?
A boom can be real and still be priced too high. A share’s price is the profits buyers expect in the future, turned into today’s dollars, the same way note 1.1 priced a bond. By 2000 prices assumed years of fast profit growth. Two things then turned against them:
| what changed | what it did to prices |
|---|---|
| rates rose: the 10-year to 6.79%, the Fed to 6.5% | profits far in the future became worth less today; the more of a price that lay far ahead, the more it lost |
| profits fell short of what prices assumed | buyers stopped paying for growth that wasn’t arriving, and prices fell toward what profits supported |
Then the economy slowed into the 2001 recession. Falling rates did not save prices: the Fed cut eleven times, and the Nasdaq kept falling for another year, because profits, not rates, were now the problem. Note 1.5 calls this the race between rates and growth. Growth won it until 2000, then lost.
4. The supply of bonds
The government spends more than it collects in taxes; the gap is the deficit (note 1.1). It fills the gap by selling new Treasuries. More bonds for the same buyers works like any market with more sellers: to sell them all, the price must fall, and a lower price is a higher yield (note 1.1). The extra yield shows up mostly in the term premium. The amounts are large:8
| what | amount |
|---|---|
| debt held by the public: what the government owes investors outside itself (not its own trust funds, such as Social Security’s), end of March 2026 | $31.45 trillion |
| the economy’s yearly output, its gross domestic product or GDP, in the same quarter | $31.91 trillion |
| so the debt is about | 99% of a year’s output |
| the government’s net interest bill (interest paid on that debt, less interest earned) in fiscal 2025 (its budget year, ending in September) | $970 billion |
| the same bill in fiscal 2022 | $476 billion |
What is the debt loop?
Interest on the debt is part of what the government spends. So when yields rise, the interest bill rises, the deficit grows, and the government must sell even more bonds, which can push yields up again:
| step | what happens | in this note’s numbers |
|---|---|---|
| one | yields rise | the 10-year 4.16% → 5.29% this year |
| two | as old debt comes due, it is replaced at the new, higher rates, so the interest bill grows | each point on $31.45 trillion adds about $315 billion a year, once it has all rolled over |
| three | interest is spending, so the deficit grows | net interest $476 billion (fiscal 2022) → $970 billion (fiscal 2025), from higher rates and more debt |
| four | the government borrows the bigger gap by selling more bonds | more supply |
| five | more bonds for the same buyers push yields up | back to step one |
It works like paying a credit card bill with another credit card: the interest you can’t pay is borrowed, and the new borrowing adds interest of its own. The loop is slow, because debt rolls over across years, and it is not automatic. It stops when the brake slows the economy and pulls rates down, when growth lifts tax revenue, or when deficits shrink (note 1.6). It turns dangerous when lenders start to doubt the government’s finances, as the UK showed in 2022 (FIG 3).
FIG 3 shows supply moving the 10-year on its own, in 2023:
it happened before · supply and the term premium
In 2023 the 10-year rose sharply while the Fed held still, and the term premium did most of the rising. Then the Treasury changed what it sold, and yields fell back. Numbers in the table below.
What it shows: supply moves the long end through the term premium even when the Fed is still, and the Treasury can lean on it by choosing what it sells. An aside: in September 2022 the UK government’s “mini-budget” of large unfunded tax cuts sent the yield on 30-year gilts (UK government bonds) up 130 basis points in three days of trading. Pension funds had used borrowed money in strategies meant to protect them against falling rates; when yields leapt they had to raise cash fast, so they sold gilts, pushing yields higher. The Bank of England, the UK’s central bank, bought long gilts from 28 September to stop the spiral.14 When a market doubts a government’s finances, the term premium can move in days.
The year 2023, step by step:1313
| when | the 10-year | the term premium | what happened |
|---|---|---|---|
| April 2023 | 3.30% | −0.09 | – |
| July 2023 | – | – | the Fed’s rate reaches 5.25–5.50% and stays there |
| August 2023 | – | – | the Treasury announces larger auctions |
| 19 October 2023 | 4.98%, the peak | 0.66 | – |
| 1 November 2023 | – | – | the Treasury says the increases for long-term bonds will be smaller |
| 27 December 2023 | 3.79% | 0.07 | weaker economic reports had followed |
5. Who buys
Supply is half a price; the other half is who buys. The main buyers of Treasuries:
| buyer | why they hold Treasuries |
|---|---|
| foreign central banks and investors | the dollar is the world’s main currency, and Treasuries are the safest way to hold it |
| the Fed | to steer rates and support the economy (QE, below) |
| banks | a safe asset they can sell quickly |
| pension funds (which pay workers’ retirement income) and insurers | to match promises they must pay decades from now |
| money-market funds (funds that hold very short loans and work like a savings account) | short-term bills |
| households | savings |
When a big buyer steps back, the rest need a better price: a higher yield. The biggest swing buyer, the one whose buying or stopping moves the price most, is the Fed.
How does the Fed buy bonds, and why?
In a crisis the Fed cuts its overnight rate, but it can’t go much below zero. To push long rates down too, it buys long bonds itself: quantitative easing (QE). It pays by adding new reserves to the seller’s bank account (note 1.2), money created for the purchase. Later it reverses: quantitative tightening (QT). It lets the bonds it owns mature without buying new ones, so the Treasury must sell those bonds to everyone else instead.
| QE: the Fed buys | QT: the Fed steps back | |
|---|---|---|
| long bonds left for everyone else | fewer | more |
| the risk of being stuck that investors carry | less: the Fed holds it | more |
| so the term premium | falls: investors ask less extra pay | rises: investors ask more |
| when it is used | in downturns and crises | to shrink back afterwards |
August 2020 shows how far this can go. The Fed was buying, and investors wanted safety in the pandemic:13
| on 4 August 2020 | |
|---|---|
| the expected path: the average overnight rate lenders expected over ten years | 1.18% |
| the term premium | −0.66 |
| the 10-year yield | 0.52% |
Lenders expected overnight lending to pay about 1.18% a year, yet locked in 0.52% for ten years. Instead of being paid extra for the risk of being stuck, they gave up 0.66 points a year for the safety of a 10-year note. That is what a term premium below zero means.
6. Uncertainty
The term premium is pay for the risk of being stuck at a fixed rate while the world changes. The less sure lenders are about the next ten years, the more they ask.
Picture two lenders deciding whether to lock in for ten years. The first is sure inflation will stay low and the Fed will hold steady: locking in carries little risk, so they ask little extra. The second can picture inflation landing anywhere: if it lands high, they are stuck with a rate that no longer pays, so they ask more. The market’s term premium is all lenders together. The wider the range of futures they can picture, the higher it goes:
| what lenders see | the term premium | why |
|---|---|---|
| inflation could land almost anywhere | up | stuck at a fixed rate, a lender loses badly if inflation lands high |
| inflation steady, and expected to stay so | down | little chance the fixed rate turns bad |
| the Fed could go either way | up | the rate locked in today could soon look poor |
| the Fed’s path clear and believed | down | future rates are easy to guess |
| a war or crisis with no visible end | up | more ways for the next ten years to go wrong |
| bonds tend to rise when stocks fall | down, even below zero | investors hold them as insurance and accept less pay, as for any insurance |
This year the premium rose from 0.50 to 1.02, with a war under way, heavy government borrowing and a Fed that turned from cuts to a hike. In August 2020 it was −0.66, with the Fed buying and bonds wanted as insurance. Whether bonds still work as insurance is note 1.5.3
Back to this year: why the real yield jumped
The six forces against this year’s numbers:
| force | this year | what it did to the 10-year |
|---|---|---|
| the Fed’s path | the 2-year rose from 3.60% to 4.88%, and the Fed hiked | expected path up 0.61 points |
| inflation | the CPI up 3.4%, driven by oil: Brent $71 → $114 | breakeven unchanged at 2.36%: lenders expect the Fed to contain it |
| growth and investment | the Fed called investment “robust” | supports a higher real yield |
| supply, who buys and uncertainty | debt about 99% of GDP; a war with no visible end | term premium up 0.52 points |
So the year’s rise was not lenders fearing inflation. It was lenders expecting a firm Fed in a strong economy, and asking more to lock up money for ten years while the government borrows heavily and a war goes on. The model can’t split the premium between supply and uncertainty. Note 1.5 follows the rise to everyone else.
02 the words
The words in this note.
Every term this note defines, in the order it appears.
| word | what it means |
|---|---|
| jobs report | The government’s monthly count of jobs added and of unemployment. |
| futures | Contracts that pay according to a number in the future, such as the Fed’s rate. Their prices show the market’s odds. |
| Brent, WTI | The main world and US benchmark prices for a barrel of crude oil. |
| supply shock | Something that makes production costlier, so prices rise and growth slows at the same time. |
| stock, share | A small slice of ownership in a company. |
| index | One number that tracks the combined prices of many stocks, such as the Nasdaq Composite or the S&P 500. |
| rally | A long run of rising prices. |
| swing buyer | The buyer whose buying or stopping moves the price most; for Treasuries, the Fed. |
| debt held by the public | What the government owes to investors outside itself. |
| GDP | Gross domestic product: the value of everything a country produces in a year. |
| net interest | The interest the government pays on its debt, less the interest it earns. |
| fiscal year | The government’s budget year. In the US it ends in September. |
| gilts | UK government bonds. |
| pension fund | A fund that pays workers’ retirement income. |
| money-market fund | A fund that holds very short loans and works like a savings account. |
| QE, QT | Quantitative easing: the Fed creates money to buy bonds. Quantitative tightening: it lets them mature without replacing them. |
Every term in the notebook, with the note that explains it, is in the notebook’s glossary.
sources read 2026-10-01
hover, tap or focus · every number above is in here
Sources · 14 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
- US Energy Information Administration (2026). Crude oil prices: Brent, Europe (DCOILBRENTEU), daily; and WTI spot (WTISPLC), monthly. Retrieved from FRED, 1 October 2026. Data, not peer-reviewed. fred.stlouisfed.org/series/DCOILBRENTEU
- US Bureau of Labor Statistics (2026). Consumer price index for all urban consumers, not seasonally adjusted (CPIAUCNS, retrieved 2 October 2026), the unemployment rate (UNRATE) and nonfarm payrolls (PAYEMS, retrieved 1 October 2026), from FRED. Inflation is computed here as the change from the same month a year earlier, as BLS reports it; October 2025 has no index, because no prices were collected during the shutdown. Data, not peer-reviewed. fred.stlouisfed.org/series/CPIAUCNS
- Nasdaq OMX Group and S&P Dow Jones Indices (2026). Nasdaq Composite (NASDAQCOM) and S&P 500 (SP500), daily closes. Retrieved from FRED, 1 October 2026. Data, not peer-reviewed. fred.stlouisfed.org/series/NASDAQCOM
- US Treasury, Office of Management and Budget and Bureau of Economic Analysis (2026). Federal debt held by the public at the end of each quarter (FYGFDPUN), net interest outlays by fiscal year (FYOINT, OMB), federal interest payments in the national accounts at an annual rate (A091RC1Q027SBEA, BEA; a broader measure, not comparable with FYOINT) and gross domestic product (GDP). Retrieved from FRED, 1 October 2026. Data, not peer-reviewed. fred.stlouisfed.org/series/FYGFDPUN
- Federal Open Market Committee (2026). Federal Reserve issues FOMC statement, 16 September 2026. The 25-basis-point increase to 3.75–4.00%, the 12–0 vote, and the quoted assessment of productivity and investment. Not peer-reviewed. federalreserve.gov/newsevents/pressreleases/monetary20260916a
- Axios (2026). Oil, gas prices spike as Iran war thrusts Strait of Hormuz into crisis, 9 March 2026; and Al Jazeera (2026), Oil prices surge as US-Iran strikes intensify in Strait of Hormuz, 7 September 2026. News, not peer-reviewed; the source of the war’s timing and of the strikes in September. The Strait’s share of oil is the US Energy Information Administration’s (World Oil Transit Chokepoints, eia.gov): about 20% of world petroleum consumption and a quarter of seaborne oil trade, in the first half of 2025. Prices on this page are FRED’s, not theirs. axios.com/2026/03/09/oil-prices-iran-war-strait-hormuz
- Federal Reserve History (2013). The Great Inflation, 1965–1982; and Oil shock of 1978–79. federalreservehistory.org, essays by Federal Reserve staff. Not peer-reviewed; the source of the 1979–81 events: the revolution in Iran, Volcker taking office in August 1979, and the recessions that followed. federalreservehistory.org/essays/great-inflation
- US Department of the Treasury (2023). Quarterly Refunding Statement of Assistant Secretary for Financial Markets Josh Frost, 2 August 2023 (the gradual increases in auction sizes), and the statement of 1 November 2023 (increases continuing “at a more moderate rate in longer-dated tenors”). Not peer-reviewed. ; jy1864 home.treasury.gov/news/press-releases/jy1671
- Bank of England (2022). Bank of England announces gilt market operation, 28 September 2022; and Financial stability buy/sell tools: a gilt market case study, Quarterly Bulletin 2023. The 130-basis-point rise in 30-year gilt yields over three days of trading, the forced selling by LDI funds, and the purchases. Not peer-reviewed. bankofengland.co.uk/quarterly-bulletin/2023
- National Bureau of Economic Research (2023). US business cycle expansions and contractions. NBER. The peak and trough months of US recessions, including March and November 2001; checked 6 October 2026. Not peer-reviewed. nber.org/research/data/us-business-cycle-expansions-and-contractions
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.