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What Is US10YR?

Updated: Jul 28, 2021

U.S.10-Year Treasury Note

US10YR Treasury Yield

The 10-Year Treasury Yield, bonds, maturity rates: these terms all revolve around a rabbit hole called the bond market, which could have a significant impact on the movements of the financial markets.

Recently, the term 10-Year Treasury Yield has increasingly popped up in the news and a whole fuzz has been made about it.

CNN even calls the 10-Year Treasury yield, or the bond market as a whole ‘Wall Street’s new bogeyman’ – but why is that, exactly?

This, exactly, is what we are looking at in the article. We will be looking at

So, buckle up and enjoy the ride!

What Is the US10YR Treasury Rate?

Before we could dive into what the 10-Year Treasury yield or US10YR means, we should look at what Treasury securities are in the first place.

Consider a situation where the US government would like to build more schools or better roads. In order to execute this project, the government needs to raise money – or capital.

They could bring in more revenue, through either increasing taxation, or they could borrow through issuing obligations: the Treasury securities.

What the government essentially is saying when they are creating a Treasury security is something in the order of

‘Hey investor, we would like to execute a really nice project, and we would like to present you with an excellent opportunity to lend money to us. Of course, we, the government, will pay you back in time – with interest!’

This must sound lucrative, right? These securities are provided by an institution, whose reputation precedes them.

After all, when the government wants to borrow money from you – it surely must be one of the safest investments one could get...?

Of course, the government realises that investors are not just willing to lend out money all day and all night. Investors want something in return. As a result, the government promises a return on that investment – the Treasury yield.

Now, it has been mentioned earlier that the government promises to pay back they have borrowed from investors in due time. This time could vary, depending on the type of security. This is where the three types of Treasury securities come in:

  • Treasury bills

  • Treasury notes

  • Treasury bonds (or long bonds)

The Treasury bills have the shortest period of repayment (the ‘maturity rate’), ranging from 4 weeks to 52 weeks (1 year). The T-Bills (as they are often called) are auctioned every week. Often, these do not pay additional interest on the bond.

The Treasury notes are securities that have intermediate maturity rates, ranging from 2, 3, 5, 7 or 10 years. These are sold at auctions that take place monthly for 2, 3, 5 and 7-year Treasury notes, whereas the auctions for 10-Year Treasury notes take place every quarter in February, May, August or November.

Lastly, the Treasury bonds are the securities with the longest maturity rates, with no longer than 30 years. Since 2020, the US Treasury is also re-issuing the 20-Year Treasury bonds again. These are auctioned quarterly as well.

Out of the various Treasury securities, the investors most frequently look at the 10-Year Treasury note, abbreviated as the US10YR note.

How Does a US10YR Bond Work?

Earlier, we have mentioned that when the government borrows money from investors through issuing the Treasury securities, they also pay out an interest rate – also known as the Treasury yield.

Every Treasury security has a different yield and since it is somewhat more risky to lend money to the government for a longer period, the yield on longer-term Treasury securities (bonds and notes) are higher than on short-term securities (bills).

Nevertheless, Treasury securities generally are reputable for having low risks – since the investor is literally lending money out to the government, and the government faithfully promises that the investor will receive their money back.

When purchasing the US10YR, the investor is loaning the government for a period of 10 years and in return, the initial loan is paid back in fixed instalments – also known as coupons. In addition to these repayments, the US10YR is issued with a fixed interest rate (the yield) set from the moment of purchase.

The government proceeds with issuing the US10YR note, or any other Treasury security, through auctions. Each bond has a purchase price and a face value (also known as par value), and looks like this:

The example above shows a 10-Year Treasury note, issued on 16 August, 1976 and with a maturity date of 15 August, 1986 for a face value of $5,000 and a coupon rate of 8%.

This means that per year, 8% of the bond is paid out to the bondholder, whom we assume is named