What is the yield on the current 10 year treasury note?

• A. 2.56%
• B. 1.75%
• C. 3.20%
• D. 2.00%

Answer: (A)

A Treasury note’s yield is the annual return you would earn if you bought it today and held it to maturity, accounting for the fixed coupon payments and the redemption at par. Prices move inversely to yields: when the note’s price is high, the yield is low, and when the price is low, the yield is high. The current market price of the 10-year note implies a yield to maturity around 2.56%, so that is the number that matches the present valuation of the cash flows you’d receive over the next decade. The other numbers would require different price levels and market conditions that aren’t what the current price reflects. This is why 2.56% is the best fit for the current yield on the 10-year Treasury.