The year 2025 has begun on shaky ground, at least in terms of market performance. While stocks struggle to gain solid footing, one particular data point has been mentioned by news stories as a cause for concern: rising Treasury yields.
Since this topic can feel overly technical, let’s break it down to simple terms and explore what rising yields could mean for you and your savings.
Earlier this week, 10-year U.S. Treasury yields rose to their highest levels since November 2023.
A Treasury bond’s yield is the amount of interest paid out at the end of the bond’s term—in this case, 10 years. The yield for 10-year Treasury yields recently rose to around 4.8%—a 14-month high.
This high level didn’t come from nowhere—it’s been building for some time. A mixture of solid performance in the labor market and uncertainty about the effects of proposed tariffs has sparked concerns about high inflation resurfacing.
The task of managing that inflation falls to our nation’s central bank, the Federal Reserve. In simple terms, the Fed helps speed up or slow down the economy by decreasing or increasing interest rates, respectively (if borrowing costs more, less people borrow money, slowing down markets).
If higher inflation is on the way, the Fed is less likely to cut interest rates. It can also mean increased volatility in the stock market. Both expectations can increase demand for Treasury bonds, driving yields higher.
This spike in yields is affecting consumers.
In our day-to-day lives, higher bond yields may not seem like a big deal—but for market analysts, they serve as a signpost of things to come. Higher yields tend to reflect higher interest rates, which make paying off debt more expensive. Consumers could find it more difficult to pay off auto loans or credit card debt, the latter of which are already at record levels. Higher interest rates can also harm consumers indirectly through market performance, since more expensive debt can harm businesses’ bottom lines.
We’re already seeing some of these effects as markets respond to the news of higher bond yields. According to Business Insider, the S&P 500 has erased all gains made in its post-election rally. Consumer portfolios that are “all in” on stocks could already be feeling the pain.
In the face of inflation, gold stands out as a hedge.
In an article titled “Gold Glitters as Inflation Fears Rise Again,” Barron’s recently referred to gold as “the ultimate ‘store of value.” The article’s reasoning is that during times of economic turmoil, uncertainty, and hardship, gold often appeals to those looking for a safe-haven asset.
But gold serves as more than just a “bad news” asset. As you may recall, gold prices also soared to new record highs on expectations of lower interest rates, proving gold’s ability to experience historic growth in both good times and bad.
Whether the stock market looks to be facing more headwinds or more economic growth is on the way, physical gold remains a cornerstone asset for American portfolios.
