Amid Stubborn Inflation, Should You Invest in 10-Year Treasury Notes?
Amid a resilient economy and labor market coupled with stubborn inflation, the yield or interest rate on a 10-year Treasury note has hovered around 4–5 percent since 2003. And in mid-January, the yield climbed to 4.79 percent, its highest since Nov. 1, 2023.
So you may be considering investing in 10-year Treasury notes. But first, it’s important to understand how these debt securities work.
What Is a 10-Year Treasury Note?
A 10-year Treasury note is essentially a loan you (the investor) provide to the U.S. government. It matures 10 years after the date of issuance. And it pays interest at a fixed rate every six months before the principal is paid off at maturity.
- Face value: This is the principal, or what you paid to get the T-note.
- Maturity: The date when the government pays you back the T-note’s face value.
- Yield: The interest rate you earn for lending your money to the government; also called the coupon rate.
The U.S. government funds its operations in part by issuing T-notes as well as Treasury bills (T-bills) and Treasury bonds.
The Importance of the 10-Year Treasury Yield
The 10-year Treasury yield is often seen as an indicator of investor confidence in the economy. When investors have positive outlooks on the economy, they tend to invest in riskier assets like stocks and equity exchange-traded funds (ETFs) for potentially higher returns. This causes the government to raise yields on T-notes to make them more attractive.
On the other hand, fears of a struggling economy could trigger investors to flock to T-notes and other safe haven investments. This could push up the price of T-notes.
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But inflation also plays a major role when it comes to the 10-year Treasury yield. During times of high inflation, investors demand higher yields on T-notes in order to make up for the decrease in buying power caused by inflation.
Advantages of the 10-Year Treasury Note
Treasury notes are among the safest investments out there. Plus, the interest payments on 10-year T-notes are tax-exempt at the state and local levels. And you don’t need to hold your notes until maturity. You can sell T-notes on the secondary market if you find an opportunity to do so.
Risks of Investing in 10-Year Treasury Notes
High inflation could diminish the purchasing power of your fixed-interest payments. In this case, you may think of selling your T-notes on the secondary market. But high inflation and a spike in interest rates could also push up yields, which means newer-issued notes are more valuable. As a result, you may end up selling at a capital loss.
How to Buy T-Notes
You can purchase 10-year Treasury notes in increments of $100 through the official TreasuryDirect website. You can also buy T-notes through banks and brokers. But this may involve commission charges and other fees.
The government issues new 10-year Treasury notes in February, May, August, and November. The Treasury also releases the most recent issues during reopenings in other months. These would have the same maturity date and coupon rates as the current issue, but they’d have a different purchase price based on current market conditions.
Should You Invest in the 10-Year Treasury?
A 10-year Treasury note can be a safe investment that provides you with ongoing and predictable interest payments in addition to your principal at maturity. However, you likely won’t get the same return you could earn from potentially riskier investments. But this doesn’t mean T-notes can’t help you mitigate risk as part of your fixed-income strategy in a diversified portfolio.
The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
