What Is a Bond Yield?

The bond yield represents the return an investor receives for holding a government bond.

For example, the US 10-Year Treasury Yield shows the interest rate the US government pays when borrowing money for ten years.

Why Bond Yields Matter

Bond yields influence mortgage rates, loans, and stock market valuations and because of this, they are one of the most important indicators in the global financial system.

Investors, economists, and central banks closely watch bond yields to understand economic conditions and future interest rate expectations.

What Is the Yield Curve?

The yield curve compares interest rates of government bonds with different maturities, such as 2-year and 10-year bonds.

Normally, long-term bonds have higher yields than short-term bonds because investors demand compensation for lending money over a longer period.

What Is a Yield Curve Inversion?

A yield curve inversion occurs when short-term interest rates rise above long-term rates.

Historically, yield curve inversions have often occurred before economic recessions, which is why this indicator receives significant attention from investors and economists.