Government Bond Yields

What is a bond yield?

When a government borrows, it sells bonds, which are promises to repay the money with interest. The yield is the yearly return a buyer gets by buying one at today’s price and holding it until it is repaid. A two-year yield is for a bond repaid in two years, a ten-year yield for one repaid in ten.

What does the gap between them tell you?

Lenders usually want more for lending longer, so the ten-year yield is normally above the two-year. When the gap drops below zero, short-term borrowing costs more than long-term borrowing. That is unusual, and many people read it as a sign of worry about the economy.

Why do people look at them next to Bitcoin?

Governments are among the safest borrowers, so their bond yields are roughly what money can earn with little risk of not being repaid. When yields rise, holding something that pays no interest, like gold or Bitcoin, means giving up more. The link is loose.

How is it worked out?

The US yields are published daily by the US Treasury, and the German yields by the Bundesbank. The gap chart subtracts what a US two-year bond pays from what a US ten-year bond pays. The two countries work out their yields in slightly different ways, so read small gaps between US and German yields loosely.

What does it not tell you?

A yield says what a bond pays if it is held until it is repaid, not what it will sell for before then. It does not say where Bitcoin will move.