10 Year Bond Rate

The 10 year bond rate is considered the benchmark of long-term investments in US government bonds. The US government bonds or the US Treasury bonds are bonds with a maturity period of 10 to 30 years. Investments in US Treasury bonds are considered to be safe, because they are issued by the US Treasury and guaranteed by the US government.[br] The denomination of these bonds ranges from $1000 to $1 million, and provide interest income every six months. Mostly, US treasury bonds are purchased not directly from the treasury, but from a broker or a qualified financial institution.

10 Year Bond Rate – What Is a Bond?

Bond is an investment vehicle denoting a loan to a government, corporation or municipality. Generally, bonds pay a fixed rate of interest and return the principal investment upon maturity. For example, with a 10-year bond, you receive interest income every six months based on the 10 year bond rate. At the end of 10 years, investors receive the principal amount. It is always better to invest in bonds that are FDIC approved.

10 Year Bond Rate – Governments Buy Bonds

The 10 year bond rate is the rate of interest that a 10 year bond offers. Many foreign governments buy US bonds as a hedge. Individual investors in the US and other countries also buy US treasury bonds. For foreign governments, investing in bonds is a means of earning income and as a hedge against their trading with the US.

10 Year Bond Rate – Why Bonds?[br]

Investors normally opt for US Treasury bonds with 10 year bond rate or 30 years bond rate when the income from other forms of investments, such as equities, futures, options and mutual funds, are extremely volatile. However, when the inflation and the budget deficit of the US are too high, the interest yield might be low. Like a corporation, when the government finances are healthy, the interest yield also goes up. 

As of October 2009, the 10 year bond rate is somewhere around 4%. It used to be around 15% during the 80s. The low rate is attributed to the 2008 global economic crisis. However, it is advisable to invest your money in bonds, rather than keep them in savings accounts that offer very low interest rates.