The most important number nobody looks at.
Bond yields sit underneath the price of almost everything else. Once you can read them, a great deal of otherwise inexplicable market behaviour resolves into something simple.
For research and education. Not financial advice.
Start with the mechanism
A government bond yield is the return you get for lending money to a government. That return is the benchmark against which every other investment is judged: if a safe bond pays you 5%, a risky share has to offer considerably more than 5% of expected return to be worth owning.
So when yields rise, everything else has to compete harder. That is the entire mechanism, and it explains an enormous amount.
The two that matter
- The 2-year is mostly a bet on what the central bank will do over the next couple of years. It is the cleanest read on rate expectations. When you see it jump after an inflation print, that's the market repricing what the Fed will do.
- The 10-year reflects longer-run expectations for growth and inflation. It's the number that anchors mortgages, corporate borrowing and equity valuations.
Real yields — the one that actually drives things
A real yield is the yield after subtracting expected inflation. It is what you actually earn in purchasing power, and it is the number that tends to matter most:
- Rising real yields raise the cost of holding assets that pay no income — which is why gold often moves inversely to them (more on gold).
- Rising real yields hit long-duration growth stocks hardest, because their value rests on profits far in the future, and those get discounted more heavily.
The inverted curve
Normally longer-dated bonds yield more than shorter ones — you're locking money up for longer. When that flips, and short yields exceed long ones, the curve is inverted. It is often described as a recession indicator, and historically it has frequently preceded one — but the lead time has been long and variable, and "this has often happened before" is not the same as "this will happen now." Treat it as a signal that the bond market is worried, not as a forecast.
The habit worth building. When an asset moves and the news explanation doesn't quite fit, check what the 2-year yield and the dollar did that day. A surprising proportion of "unexplained" moves in equities, gold and commodities are simply the bond market repricing rates, with the headline written afterwards.
Frequently asked questions
Why do rising yields hurt tech stocks most?
Because a fast-growing company's value rests mostly on profits far in the future, and higher yields reduce what those distant profits are worth today. A company earning steady cash right now is less exposed to that mathematics.
What does an inverted yield curve mean?
Short-dated bonds yielding more than long-dated ones — historically an unusual state that has often preceded recessions, though with long and variable lead times. It reflects concern in the bond market; it is not a forecast, and TRUE does not treat it as one.
What's a real yield?
The yield after subtracting expected inflation — what you actually earn in purchasing power. It's the quiet driver behind gold and long-duration equities.
See what yields are doing to your holdings.
TRUE connects the macro mechanism to the assets you actually follow.
For research and education. Not financial advice.