The 10-Year Treasury Hit 5.23%, Its Highest Since 2007. Here's How to Actually Lock In That Yield.

The number everyone is watching

On Friday, September 25, the 10-year US Treasury yield touched 5.225%. That's the highest level since 2007, before the financial crisis. The 30-year bond reached 5.502%, a level last seen in 2004.

For most of the past 15 years, "safe" money earned almost nothing. Today, the US government will pay you more than 5% a year for a decade. That changes the math for savers, retirees and stock investors alike.

How we got here in one month

The 10-year yield first broke 5% on September 15. It kept climbing:

• Sept. 15: touched 5.04%, closed at 5.00%
• Sept. 16: the Fed raised rates to 3.75%-4.00%, its first hike since 2023
• Sept. 23: 5.054% at the close, after a weak 5-year note auction and a composite PMI of 58.4, the strongest business-activity reading since July 2021
• Sept. 25: 5.225% intraday

Five forces are pushing at once:

1. Oil. The Iran conflict kept Brent crude above $100 a barrel for much of September. Higher energy costs keep headline inflation high.
2. A hawkish Fed. Governor Michael Barr said the Fed "will likely need to deliver further interest rate hikes." Futures now price about a 73% chance of an October hike.
3. A stronger-than-expected economy. Strong growth means less need for rate cuts.
4. Government borrowing. Large deficits mean the Treasury must sell more bonds, and buyers want a higher yield to absorb them.
5. Weak auction demand. When fewer buyers show up at a Treasury auction, the yield has to rise to clear the sale.

What "locking in" 5.23% actually means

A bond yield is the return you get if you buy today and hold to maturity. Buy $10,000 of a 10-year Treasury note at a 5.23% yield, and you collect about $523 a year, paid as roughly $261 every six months, for 10 years. Then you get your $10,000 back.

That income is fixed. If the Fed cuts rates in 2027, your coupon doesn't change. If inflation cools to 2%, you're earning roughly 3 points above inflation. That's why some investors see this as a once-in-a-generation window.

The risk most beginners miss

If yields keep rising, the market price of the bond you already own falls. A 10-year note bought at 5.23% might trade below what you paid if new 10-year notes pay 5.75% next year.

This only matters if you sell before maturity. Hold to the end and you get the full face value back. So match the maturity to when you'll need the money:

• Need the cash in a year? Use Treasury bills (4 to 52 weeks).
• Saving for something 3 to 5 years out? Consider 2-, 3- or 5-year notes.
• Locking in retirement income? 10-year notes or a bond ladder.

Bond funds and ETFs are different. They never mature, so there's no date when you're guaranteed your money back. A fund with a duration of 7 falls roughly 7% for every 1-point rise in yields.

How to buy Treasuries, step by step

Option 1: TreasuryDirect.gov (US residents). Open a free account and buy bills, notes or bonds at auction, starting at $100. No fees. The downside: it's clunky, and selling before maturity requires moving the security to a broker first.

Option 2: A brokerage account. Fidelity, Schwab, Vanguard, E*TRADE and most major brokers let you buy new Treasuries at auction or existing ones on the secondary market, usually commission-free. You can sell any business day.

Option 3: Treasury ETFs. Simple and liquid, but no maturity date, so price risk never goes away. Target-maturity ETFs, which close in a specific year, are a middle ground.

Taxes: Treasury interest is taxed federally but is exempt from state and local income tax. That's a real advantage in high-tax states like California and New York.

Should you do it?

A Treasury at 5.2% is a strong offer for money you won't need for years, and for the "safe" part of a portfolio that has been earning 1% to 2% for most of the past decade.

It isn't a replacement for stocks if your goal is long-term growth. Over long periods stocks have returned more. But with the S&P 500's earnings yield only a little above 5%, the gap between safe and risky assets is the narrowest it has been in years. We explain that trade-off in The 10-Year Hit 5%. Stocks Now Barely Out-Yield It.

Canadians: you can buy US Treasuries or Treasury ETFs through most Canadian brokers. Remember the currency risk, and see our guide to the cheapest way to buy US securities in Canada.

The honest uncertainty

Nobody knows where the peak is. If oil falls and inflation cools, 5.2% could look like a gift a year from now. If the Iran conflict drags on and deficits keep growing, yields could go higher first. The practical move: buy in stages rather than all at once, and pick maturities that match when you'll need the money.

Frequently asked questions