Question 1

What is a bond yield?

Accepted Answer

The yield is the annual return you earn by buying a government bond at its current market price and holding it to maturity. It moves inversely to price: when investors buy bonds the price rises and the yield falls, and when they sell the yield rises. So a headline about yields spiking is describing bonds being sold off, not a better deal appearing.

Question 2

What is the yield curve?

Accepted Answer

It is the same government’s borrowing cost plotted across maturities, from a few months out to thirty years. Normally longer maturities yield more, because lending for longer carries more risk — that upward slope is a normal curve. The shape encodes what the market expects: the short end tracks expected central bank policy, while the long end reflects growth, inflation and term premium.

Question 3

What does an inverted curve mean?

Accepted Answer

Inversion means shorter maturities yield more than longer ones, most commonly measured as the 10-year minus the 2-year falling below zero. It says the market expects policy rates to be lower in future than they are now — usually because tight policy today is expected to slow the economy. It has preceded every US recession since the 1970s, though with long and highly variable lags, so it is a warning about direction rather than timing.

Question 4

Why do currency traders watch bond yields?

Accepted Answer

Because rate differentials are one of the most durable drivers in FX. Capital tends to flow toward higher real yields, so the spread between two countries’ bonds often tracks their exchange rate closely — the US–Japan 10-year gap and USD/JPY being the standard example. Watching the spread rather than either yield alone is what makes this useful.

Question 5

Why is the 2-year yield so closely watched?

Accepted Answer

Because it is the most policy-sensitive part of the curve. Two-year yields move on what the market expects the central bank to do over the next couple of years, so they react quickly to inflation data and to central bank communication. The 10-year is a blend of growth expectations, inflation expectations and term premium, so it responds more slowly and to a wider set of forces.

Question 6

What is the difference between nominal and real yields?

Accepted Answer

A nominal yield is the headline number. The real yield subtracts expected inflation from it, and it is what actually determines whether lending money leaves you better off. Real yields matter especially for gold, which pays no income: when real yields are high, holding a non-yielding asset has a genuine cost, and when they fall or turn negative that cost disappears.

Country	3M	2Y	5Y	10Y	30Y	10Y − 2Y	Curve	10Y Chg
🇺🇸United States	5.38	4.72	4.34	4.28	4.44	-44 bp	Inverted	+2.4
🇬🇧United Kingdom	5.21	4.38	4.02	4.12	4.61	-26 bp	Inverted	+1.8
🇩🇪Germany	3.72	2.94	2.51	2.48	2.68	-46 bp	Inverted	-0.6
🇫🇷France	3.74	3.06	2.88	3.14	3.82	+8 bp	Flat	+1.2
🇮🇹Italy	3.81	3.44	3.42	3.92	4.68	+48 bp	Normal	+2.1
🇯🇵Japan	0.02	0.34	0.56	1.04	2.12	+70 bp	Normal	+0.8
🇨🇭Switzerland	1.42	0.94	0.72	0.78	1.04	-16 bp	Inverted	-0.4
🇨🇦Canada	4.94	4.02	3.54	3.48	3.38	-54 bp	Inverted	+1.1
🇦🇺Australia	4.34	4.12	4.06	4.34	4.68	+22 bp	Normal	+3.2
🇳🇿New Zealand	5.58	4.86	4.42	4.62	4.94	-24 bp	Inverted	+2.6

Bonds

🇺🇸 United States Yield Curve

Rate Differentials

Government Bond Yields

Understanding Bonds

Frequently asked