How the Yield of 10-Year US Treasury Bonds Indicates in the Finance Markets

 How the Yield of 10-Year US Treasury Bonds Indicates in the Finance Markets

The yield of the 10-year US government Bonds

Finance Knowledge/ News Sharing

In 18thMarch, 2021, the yield of the 10-year US government bonds rises to highest of 1.738%. How the yield of the 10-year US government bonds represent to Finance and what is the indications of such increasing?


Firstly, the 10-year US government bond's yield is the benchmark of borrowing costs across the market. A higher yield means that the cost of borrowing increases.

Indications and Effects for the increase of 10-year US government bonds yield

1. Expected Inflation arises in the future

Covid-19 pandemic improved

As the Covid-19 pandemic may vanish in the future because of the vaccination, the economy of US may rebound and the Fed may increase the Fed Funds Rate. This may cause inflation of US in the future. As a result, the yield of the 10-year government bonds rises in respond to the expected inflation.

2. Stock Markets would drop to respond on the some stock value calculation model

As the yield of US government bonds increases, some stocks like high-tech stocks do not provide any dividend with a high PE valuation would be suffered. The reason is that some investors think that the yield of the US government bonds provide them reasonable returns without bearing risk (US Treasury Bonds are considered risk-free) . However, holding the high-tech stocks with a higher PE would bear higher risk. Some investors would shift to the stock markets to the bond markets.

In addition, some stock value calculation model is adjusted and responded to a higher yield of 10-year government bonds. Most of the stocks would re-valued to a lower level, especially stocks with lower dividend yield. 

3. Bonds is under selling pressure

In theory, as the yield increases, the bond price decreases. The increase in the yield indicates that there is some outflows of the 10-year government market, causing the bond price drop. Sometimes market would analysis as outflows of lower-risk assets to a higher-risk assets, depending to the market's flows of money. If the stock markets is drop, that means the outflows of lower-risk assets to a higher-risk assets is not applicable.


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