30-Year Treasury Yield

What It Measures

The 30-Year Treasury Yield represents the return on lending to the U.S. government for 30 years. It's the longest standard maturity and reflects the market's view on inflation, economic growth, and fiscal policy over an entire generation. It includes a "term premium" - extra yield investors demand for locking up money for so long.

Why It's Important

• Mortgage Rates: The 30Y Treasury directly influences 30-year fixed mortgage rates (typically 30Y yield + 1.5-2% spread).
• Pension Funds: Long-duration liabilities are discounted using long-term rates. Lower yields = larger pension obligations.
• Inflation Expectations: Embeds the market's 30-year inflation forecast plus real growth expectations.
• Fiscal Sustainability: High long-term yields signal concerns about government debt levels.

Components of the 30Y Yield

• Expected Inflation: What investors think inflation will average over 30 years.
• Real Rate: The "true" return after inflation - reflects expected economic growth.
• Term Premium: Extra compensation for duration risk - can be positive or negative.

Historical Context

• 1981 peak: ~15% (Volcker inflation fight)
• 1990s-2000s: Steady decline from 8% to 5%
• 2008-2020: Range of 2-4% (secular stagnation fears)
• 2020 low: ~1.2% (COVID crisis, massive QE)
• 2023-2024: Rose to 4.5-5% (inflation + fiscal concerns)

Trading Signals

• Rising 30Y: Long-duration assets suffer (TLT, growth stocks). Housing affordability declines. Banks may benefit.
• Falling 30Y: Bullish for bonds, REITs, utilities. Supports housing market. Often signals growth concerns.
• 30Y vs 10Y Steepening: Long-end selling off faster - fiscal concerns or inflation fears.
• 30Y vs 10Y Flattening: Flight to safety in long bonds or expectations of lower long-term growth.