What Is the 10-Year Treasury Note? 10-Year Yield Explained

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The 10-year Treasury note is a U.S. government debt security that matures 10 years after it is issued, pays a fixed rate of interest every six months, and returns its face value to the holder at maturity. The 10-year Treasury yield is the annual return the market currently demands to hold that note. It moves every trading day as the note’s price changes, while the coupon set at auction stays fixed for the life of the security.

How the 10-Year Treasury Note Works

The U.S. Treasury funds part of the federal government’s obligations by issuing three types of marketable debt, separated by maturity:

• Treasury bills (T-bills): one year or less. They are issued at a discount to par and pay no coupon.
• Treasury notes (T-notes): maturities from one to 10 years. The 10-year is the longest note.
• Treasury bonds: maturities longer than 10 years.

Notes and bonds both pay a fixed coupon every six months and are redeemed at par value when they mature. A 10-year note with a 4% coupon and $1,000 face value pays $40 a year, split into two $20 payments, for 10 years, then returns the $1,000.

Coupon Rate vs. Yield

The coupon rate is set when the note is first auctioned and never changes. The yield is what a buyer earns at today’s market price. Once the note trades in the secondary market, its price drifts above or below par as interest rates change, and the yield adjusts with it.

Two yield measures come up most often:

• Current yield = annual coupon ÷ market price. This ignores any gain or loss at maturity.
• Yield to maturity (YTM) is the discount rate that makes the present value of all remaining coupons plus the face value equal to the current price. It is the measure behind the quoted 10-year yield.

The quoted 10-year yield is a constant-maturity rate: the yield of a note with exactly 10 years left, derived from the market for recently issued Treasuries. A note bought several years ago has less than 10 years remaining and its own yield.

Example of the 10-Year Treasury Note

Hypothetical example, for illustration only. An investor buys a newly issued 10-year note at par: $1,000 face value, 4% coupon, paid semiannually ($20 every six months, 20 payments in total). Assume the investor wants to sell immediately after a shift in market yields, with the full 10 years still remaining.

The price is the present value of the 20 coupons plus the $1,000 principal, discounted at half the annual market yield per period:

Price = C × [1 − (1 + r)^−n] ÷ r + F ÷ (1 + r)^n

where C = $20, F = $1,000, n = 20 periods, and r = market yield ÷ 2.

If yields rise one percentage point to 5%, the note’s market value falls about 7.8%. If they fall to 3%, it gains about 8.6%. The coupons do not change; only the price a new buyer will pay does, because new notes would offer the higher or lower rate.

The investor who holds to maturity still receives every $20 coupon and the full $1,000 at the end. The price swing becomes a realized gain or loss only if the note is sold before maturity.

Why the 10-Year Yield Is a Benchmark

The 10-year note sits at a useful point on the yield curve. It is long enough to reflect expectations about growth, inflation and interest rates over a decade, and it trades in a deep market followed by investors worldwide.

Its main uses include:

• Mortgage and lending reference. Mortgage rates and corporate borrowing costs are often compared against the 10-year yield, but they are not tied to it mechanically: lenders add their own spreads for credit risk, prepayment risk and costs.
• Valuation input. Analysts often use the 10-year yield as the “risk-free” rate when discounting future cash flows or comparing stock returns with a safe alternative. A higher yield raises the hurdle that riskier assets such as the S&P 500 have to clear.
• Yield curve signals. Comparing the 10-year yield with shorter maturities, such as the 2-year note or 3-month bill, shows the shape of the curve. Normally longer maturities yield more. When short rates rise above the 10-year (an inverted curve), markets read it as a sign that investors expect rates to fall, often because of slower growth ahead.

A rising 10-year yield can reflect confidence in the economy, but it also raises borrowing costs for households and companies, which can slow activity. A falling yield can signal that investors are seeking safety or expect weaker growth or lower inflation.

What Moves the 10-Year Treasury Yield

Three forces do most of the work:

1. Investor risk appetite. When investors are optimistic, money tends to move toward stocks and other riskier assets. Lower demand for Treasuries pushes their prices down and yields up. In periods of uncertainty, buyers turn to Treasuries for safety, bidding prices up and yields down. This is why Treasury prices often, but not always, move opposite to major stock indexes.
2. Inflation. A fixed coupon buys less when prices rise. Investors demand higher yields to offset expected inflation, and lower inflation expectations allow yields to fall.
3. Federal Reserve policy. The Fed sets a short-term target rate, not the 10-year yield. But when the Fed raises rates, Treasury yields generally rise too, as borrowing costs across the economy reset higher. Expectations about future Fed moves feed into the 10-year well before the decisions happen, and the two can move in different directions when markets expect policy changes.

A recent episode shows the combination. The Fed raised its target range from 0.25% to 0.50% in March 2022 to 5.25% to 5.50% by July 2023 to fight post-pandemic inflation, and the 10-year yield climbed from roughly 1.7% to a peak of 4.98% in October 2023.

How Investors Use 10-Year Notes

Advantages

• Credit safety. Backed by the U.S. government, the notes are considered among the safest investments available.
• Diversification. Treasuries often behave differently from stocks. In recessions, central banks tend to cut rates, which makes existing higher-coupon notes more valuable.
• Tax treatment. Coupon income is taxable federally but exempt from state and local income taxes, which matters more for investors in high-tax states.
• Liquidity. There is no minimum holding period; notes can be sold in the secondary market at any time.

Disadvantages

• Lower expected return. Yields are generally below what riskier assets such as stocks or higher-yielding corporate bonds may offer.
• Inflation risk. If inflation runs above the yield, the real return turns negative. Over a 10-year horizon this risk compounds.
• Interest rate risk. Rising yields lower the market value of existing notes, so selling before maturity can lock in a capital loss.

How to Buy a 10-Year Treasury Note

The Treasury sells notes directly through TreasuryDirect. The minimum purchase is $100, in $100 increments. Buyers choose one of two bid types at auction:

• Non-competitive bid: you accept whatever yield the auction sets and are guaranteed to receive the note.
• Competitive bid: you specify the yield you want. Your bid may be filled in full, in part, or not at all, depending on where the auction clears.

Treasuries can also be bought through a bank or brokerage, at auction or in the secondary market, though these may charge commissions or fees that TreasuryDirect does not, which reduce your net return over time. Funds that hold Treasuries, including Treasury ETFs, offer exposure without owning individual notes, but a fund has no maturity date of its own, so its price does not converge back to par the way a single held note does.

Issuance Schedule

All T-notes are issued electronically. New 10-year notes are issued in February, May, August and November; in the other months the Treasury sells additional amounts of the most recent issue through reopenings. A reopened note has the same maturity date and coupon rate as the original but a different issue date and a price reflecting interest rate changes since the first auction, so a buyer may pay more or less than par and receive a yield different from the coupon.

Common Confusions

• Note vs. bond. People often say “10-year bond,” but at 10 years the security is technically a note.
• Nominal vs. real yield. The standard 10-year yield is nominal. Treasury Inflation-Protected Securities (TIPS) of the same maturity pay a real yield, with principal adjusted for inflation. The gap between the two reflects the market’s inflation expectations plus other premiums.

FAQs

The Bottom Line

The 10-year note matters to investors who want a safe, liquid holding and to anyone tracking mortgage rates, valuations or the yield curve. Holders who keep a note to maturity receive every coupon and full face value. Selling early exposes them to price swings when rates change, and inflation running above the yield can turn the real return negative.