Yield On 10 Year Treasuries-What's The Story?

Reply Wed 16 Aug, 2017 11:21 am
I just looked into buying buying 10 Year Treasury Notes. The yield on a 10 year note is 2.26. Does that mean that if buy $1,000 worth of 10 year Treasury notes, 10 years from now the government gives me $2,260?

If so, that's a return of 8.5% a year. Not inflation adjusted, but still-pretty high.

I'm including this in the politics section since 10 year Treasuries have political significance.
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Type: Question • Score: 3 • Views: 2,661 • Replies: 4
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Reply Wed 16 Aug, 2017 01:01 pm
Not sure about treasuries in particular, but most bonds pay interest annually or semiannually. At maturity, they return face value. Bonds are frequently traded, and the price is based mostly on the rate of inflation, anticipated rate of inflation, and the perceived stability of the issuer.

Ask Cicerone Imposter. He knows lots of stuff about bonds.
cicerone imposter
Reply Mon 4 Sep, 2017 08:04 pm
roger, Don't give me too much credit on knowledge about bonds. However, it's my humble opinion that current bond rates are not even keeping up with inflation, so you end up losing money just like keeping your money under your mattress. http://www.bankrate.com/rates/interest-rates/treasury.aspx?gclid=EAIaIQobChMI6fO5qPaM1gIVEHZ-Ch2ZJQj0EAAYAyAAEgJzBvD_BwE&ec_id=m1118182&s_kwcid=AL!1325!3!68167968968!p!!s!!treasury+interest+rates&ef_id=Wa2C_AAAAGRbqhyY%3a20170905014637%3as
Our economy has been growing at a pretty healthy rate, and investments in equity seems to be the right place to place your money.
We have our investments with Vanguard.com. Our funds this year has so far returned 9.5% since January 1st. Our one year return was 12.3% (or around $73k).
My nephew asked me many years ago to manage his brother's (he's a doctor) investments, but I don't ever want that responsibility even though I have been lucky on my returns. I have learned long ago that the individual is the best fiduciary for his own money. Investment counselors charge fees, and often times, the fees take away a good percentage of any return from investments even if they do little or nothing. I know, because I used to be one of them. Most financial pundits suggest a larger ratio of investments into bonds as one grows older, but I don't believe in that hog wash. At my age, it's suggested that 80% be invested in bonds and 20% in equities. I'm on the opposite side of that recommendation. It's more important to know how the US economy is doing vs the world.
What I look at is the macro-economics of the US and world economies. The US economy keeps growing at about 2%/year. That's pretty good in today's world. Also, many pundits have been saying that the stock market is ready to lose 50% of its value this year. I won't hold my breath; they've been predicting that since 2015.
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cicerone imposter
Reply Mon 4 Sep, 2017 08:19 pm
As a simple interest return, here's a rough idea what it will return at 2.26% with a $1,000 investment.
0.0226 beginning earnings ending
1 $1,000.00 $22.60 $1,022.60
2 $1,022.60 $23.11 $1,045.71
3 $1,045.71 $23.63 $1,069.34
4 $1,069.34 $24.17 $1,093.51
5 $1,093.51 $24.71 $1,118.22
6 $1,118.22 $25.27 $1,143.50
7 $1,143.50 $25.84 $1,169.34
8 $1,169.34 $26.43 $1,195.77
9 $1,195.77 $27.02 $1,222.79
10 $1,222.79 $27.64 $1,250.43
11 $1,250.43 $28.26 $1,278.69
12 $1,278.69 $28.90 $1,307.58
13 $1,307.58 $29.55 $1,337.13
14 $1,337.13 $30.22 $1,367.35
15 $1,367.35 $30.90 $1,398.26
16 $1,398.26 $31.60 $1,429.86
17 $1,429.86 $32.31 $1,462.17
18 $1,462.17 $33.05 $1,495.22
19 $1,495.22 $33.79 $1,529.01
20 $1,529.01 $34.56 $1,563.56

Rather than bonds, I would suggest you look at Morningstar.com to look at which funds had the best returns for the long-term and their current rating. Both Fidelity and Vanguard has the lowest fees in the business, so I would start there. Rule No. 1: Don't put all your eggs into one basket. In other words, diversify. Rule No. 2: Don't try to play the market's daily ups and downs. Fees alone will make you lose. When you invest, invest over several months to average out your investments; you won't pay the highest or the lowest prices. Do the same when you withdraw from you funds; do it over several months. I withdraw a given amount every month, and pay my taxes from it. Hope this is somewhat helpful.
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Reply Wed 27 Sep, 2017 01:15 pm
You can google this and read what the US Treasury Dept says about it - https://www.sapling.com/8173138/interest-government-bonds-simple-compounded

but the basics for Notes are that for a T-note with a face value at redemption of $1,000 you pay $1,000 for new issues or buy on the secondary market at either a premium or a discount, depending on how the interest rate has changed since the Note was issued. And on a ten-year Note with an interest rate of 2.26% you will get a check in the mail for $11.30 every 6 months for a total of $22.60 per year for ten years if you continue to hold the Note, and at the end you get your $1,000 back.

But your number of 2.26 from your link means a return of 1.3% per year for ten years. See the 1-year rate in your chart.
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