Glossary · Bonds and rates
Bond
A bond is a loan you make to a government or a company: they pay you interest at a fixed rate and give the money back on a set date.
Also called: fixed income, debt security, Treasury bond
November 10, 2026. The 2-year yield: 4.73%.
Total return in 2022, interest included.
In plain words
A government needs to borrow $1,000 for 10 years. It gives you a promise: “We will pay you $40 every year and give your $1,000 back in 10 years.” That promise is a bond. The $1,000 is its face value, the $40 is the coupon (here 4% a year) and the end date is its maturity.
Bonds are called fixed income because the payments are set in advance. The US government is the world’s biggest borrower this way; its bonds are called Treasuries. Companies sell bonds too, and they pay more interest because they are riskier. Cities and states borrow this way as well, often at lower rates, because their interest is usually tax-free.
After they are sold, bonds trade between investors, and their prices move. A new buyer of a 10-year US Treasury gets 4.98% a year (November 10, 2026).
Example
A 5-year bond, step by step
- You buy a 5-year bond with a $1,000 face value and a 4% coupon, for $1,000.
- Every year you receive $40: five payments, $200 in all.
- At the end of year 5 you also get your $1,000 back. Total received: $1,200.
- If after one year new 4-year bonds pay 5%, buyers will pay only about $965 for yours: $40 a year plus $1,000 at the end is worth $965 when money earns 5%.
If you hold it to the end, the price swings do not matter: you still get every coupon and your $1,000 back, unless the borrower defaults.
One level deeper
Prices and interest rates move like a seesaw. If new 10-year bonds start paying 5%, nobody will pay full price for your old 4% bond, so its price falls until its yield matches. When rates fall, old bonds with higher coupons become more valuable.
That seesaw is how bonds lose money. In 2022, as rates rose fast, a 10-year Treasury returned −15.0% including its interest. In 1982, as rates fell, it returned +36.5%.
The longer the bond, the bigger the swing: a 30-year bond moves much more than a 2-year one for the same change in rates. This sensitivity is called duration. The other big risk is default, the borrower failing to pay, which credit ratings try to measure.
The 10-year US Treasury rate since 1953
The interest a new buyer earns on a 10-year US government bond, month by month. It ranged from 0.62% (Jul 2020) to 15.3% (Sep 1981).
The numbers behind the chart
| Date | 10-year Treasury rate |
|---|---|
| Apr 1953 | 2.8% |
| Dec 1960 | 3.8% |
| Dec 1970 | 6.4% |
| Dec 1980 | 12.8% |
| Dec 1990 | 8.1% |
| Dec 2000 | 5.2% |
| Dec 2010 | 3.3% |
| Dec 2020 | 0.9% |
| Dec 2022 | 3.6% |
| Dec 2023 | 4.0% |
| Dec 2024 | 4.4% |
| Dec 2025 | 4.1% |
| Oct 2026 | 5.2% |
Why it matters
Bonds are how governments and companies borrow, so their yields set the cost of money for everyone, including mortgages.
For investors they are the steadier part of a portfolio: over most periods they swing far less than stocks, and high-quality government bonds often rise when stocks fall.
The 10-year Treasury yield is the world’s benchmark rate: stocks, homes and other bonds are all priced against it.
A common mistake
Myth: Bonds are safe, so you cannot lose money on them.
In fact: You can, if you sell after rates rise, or if the borrower defaults. Even US Treasuries, the safest bonds there are, returned −15.0% in 2022.
Questions people ask
Why do bond prices fall when interest rates rise?
Because new bonds now pay more. An old bond paying less is only worth buying at a lower price, low enough that its yield matches the new bonds.
What is the difference between a bond’s coupon and its yield?
The coupon is fixed when the bond is sold: $40 a year on $1,000 is 4%. The yield is what a buyer earns at today’s price: buy that bond for $965 and the yield is higher than 4%.
Are bonds better than stocks?
They do different jobs. Over long periods US stocks have returned more, with much bigger swings; bonds have paid less but more steadily. Many portfolios hold both.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- US recessions (NBER business cycle dates): National Bureau of Economic Research (NBER), Business Cycle Dating Committee: US Business Cycle Expansions and Contractions.
- US 10-year Treasury bonds, total return index: Robert J. Shiller, Online Data (shillerdata.com), ie_data.xls, sheet "Data": "Long Interest Rate GS10", checked against "Monthly Total Bond Returns" and "Real Total Bond Returns".
- US Treasury par yield curve rates: U.S. Department of the Treasury, Daily Treasury Par Yield Curve Rates (Interest Rate Statistics).
- S&P Composite (price, dividends, earnings, CAPE), US consumer prices and the 10-year Treasury rate: Robert J. Shiller, Online Data (shillerdata.com).
- This page explains a term. It is not investment advice.