Bonds and Treasury Yields: How They Are Related
In this article, we will show the simple relationship between bonds and treasury yields.
Bonds are debt instruments that are used by governments and companies to borrow money from investors at cheap rates. Instead of borrowing from lending institutions at exorbitant rates and under conditions of repayment which may be too stringent for the borrower, it may be more convenient for the borrower to approach investors through the bond market.
Best Bond Brokers
-
IG consistently ranks in the top 5 for its versatile bond offerings. Traders have the opportunity to invest in global bond futures and ETFs through CFDs, share dealing, or spread betting, all with competitive spreads starting from just 1 point. For those more serious about trading, correlated interest rate products are available, alongside extra investment perks like dividend coupons.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread Betting CFTC, NFA, FCA, BaFin, ASIC, FINMA, MAS, JFSA, FMA, DFSA, BMA Web, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentral, ProRealTime Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:30 (Retail), 1:222 (Pro) -
Trade Nation provides a selection of well-known bond futures through its exclusive TN Trader platform. With a leverage ratio of 1:5, low fixed spreads, and no required minimum deposit, Trade Nation is an excellent choice for novice traders keen to enter the bond market with ease. The platform also features robust analysis tools, such as a signal centre, to identify market opportunities effectively.
Instruments Regulator Platforms Forex, CFDs, Indices, Shares, Commodities, Futures, Bonds, Spread Betting, Cryptos (Bahamas Entity Only) FCA, ASIC, FSCA, SCB, FSA TN Trader, MT4, TradingView Min. Deposit Min. Trade Leverage $0 0.1 Lots 1:30 -
Interactive Brokers remains a leading bond broker, offering an impressive range of over 1 million products. The firm's Bond Search tool efficiently filters through popular treasuries, notes, and niche municipal securities. Their commission rates are competitive, beginning at 0.2 basis points for the initial $1 million of face value.
Instruments Regulator Platforms Stocks, Options, Futures, Forex, Funds, Bonds, ETFs, Mutual Funds, Cryptocurrencies, CFDs SEC, FINRA, CFTC, NFA, CIRO, FCA, CBI, ASIC, SFC, SEBI, JFSA, MAS Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, TradingView, eSignal, TradingCentral, ProRealTime, Quantower Min. Deposit Min. Trade Leverage $0 $100 1:30 -
Accessible on both MT4 and MT5 platforms, Vantage's bond offerings span various government and corporate markets. Traders can engage with just 1 lot and speculate on fluctuating prices. A comprehensive selection of educational resources and market analysis tools is also available for those aiming to enhance their short-term trading strategies.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, ETFs, Bonds, Spread betting FCA, ASIC, FSCA, VFSC, CIMA ProTrader, MT4, MT5, TradingView, DupliTrade Min. Deposit Min. Trade Leverage $50 0.01 Lots 1:30 -
Spreadex provides spread betting and CFDs on over 19 global bonds and interest rates, such as Japanese Government Bonds and Euribor futures. With spreads starting at 2, traders access leverage up to 1:30. Both novices and experienced traders can enhance their strategies using the platform's top-tier features, which include integrated macroeconomic data and advanced order options.
Instruments Regulator Platforms Forex, CFDs, Indices, Commodities, Stocks, Crypto, Bonds, Interest Rates, ETFs, Options, Spread Betting FCA Spreadex Platform, TradingView, AutoChartist Min. Deposit Min. Trade Leverage £0 £0.01 1:30 -
City Index is a leading option for bond CFD traders due to its commission-free model and attractive spreads starting at 0.02 points. A rich array of bond market news and analysis, like the Trading Central dashboard, is available. Traders of all levels can start without a minimum deposit or explore bonds risk-free with a 12-week demo.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, Crypto, Futures, Options, Bonds, Interest Rates,ETFs,Spread Betting FCA, ASIC, CySEC, MAS Web Trader, MT4, TradingView, TradingCentral Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:30 -
CMC Markets provides a superb range of over 50 government bonds and interest rate products, with spreads starting at just 1 point. Traders can enhance their strategies using the company's unique market insights and pattern recognition tools. Additionally, those trading in large volumes can benefit from spread discounts of up to 21% on treasuries through the CMC Price+ programme.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, ETFs, Treasuries, Custom Indices, Spread Betting FCA, ASIC, MAS, CIRO, BaFin, FMA, DFSA, Web, Spectre, MT4, TradingView Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:30 (Retail), 1:500 (Pro)
IG
Trade Nation
Interactive Brokers
Vantage FX
Spreadex
City Index
CMC MarketsSafety Comparison
Compare how safe the Bonds and Treasury Yields: How They Are Related are and what features they offer to protect traders.
| Broker | Trust Rating | FCA Regulated | Negative Balance Protection | Guaranteed Stop Loss | Segregated Accounts |
|---|---|---|---|---|---|
| IG | ✔ | ✔ | ✔ | ✔ | |
| Trade Nation | ✔ | ✔ | ✔ | ✔ | |
| Interactive Brokers | ✔ | ✔ | ✘ | ✔ | |
| Vantage FX | ✔ | ✔ | ✘ | ✔ | |
| Spreadex | ✔ | ✔ | ✘ | ✔ | |
| City Index | ✔ | ✔ | ✔ | ✔ | |
| CMC Markets | ✔ | ✔ | ✔ | ✔ |
Payments Comparison
Compare which popular payment methods the Bonds and Treasury Yields: How They Are Related support and whether they have trading accounts denominated in British Pounds (GBP).
| Broker | GBP Account | Debit Card | Credit Card | Neteller | Skrill | Apple Pay |
|---|---|---|---|---|---|---|
| IG | ✔ | ✔ | ✔ | ✘ | ✘ | ✘ |
| Trade Nation | ✔ | ✔ | ✔ | ✘ | ✔ | ✘ |
| Interactive Brokers | ✔ | ✘ | ✘ | ✘ | ✘ | ✘ |
| Vantage FX | ✔ | ✔ | ✔ | ✔ | ✔ | ✘ |
| Spreadex | ✔ | ✔ | ✔ | ✘ | ✘ | ✘ |
| City Index | ✔ | ✔ | ✔ | ✘ | ✘ | ✘ |
| CMC Markets | ✔ | ✔ | ✔ | ✘ | ✘ | ✘ |
Mobile Trading Comparison
How good are the Bonds and Treasury Yields: How They Are Related at mobile trading using apps or other mobile interfaces.
| Broker | Mobile Apps | iOS Rating | Android Rating | Smart Watch App |
|---|---|---|---|---|
| IG | iOS & Android | ✔ | ||
| Trade Nation | iOS & Android | ✘ | ||
| Interactive Brokers | iOS & Android | ✔ | ||
| Vantage FX | iOS & Android | ✘ | ||
| Spreadex | iOS & Android | ✘ | ||
| City Index | iOS & Android | ✘ | ||
| CMC Markets | iOS & Android | ✘ |
Beginners Comparison
Are the Bonds and Treasury Yields: How They Are Related good for beginner traders, that might want an affordable setup to get started, along with good support and educational resources?
| Broker | Demo Account | Minimum Deposit | Minimum Trade | Support Rating | Education Rating |
|---|---|---|---|---|---|
| IG | ✔ | $0 | 0.01 Lots | ||
| Trade Nation | ✔ | $0 | 0.1 Lots | ||
| Interactive Brokers | ✔ | $0 | $100 | ||
| Vantage FX | ✔ | $50 | 0.01 Lots | ||
| Spreadex | ✘ | £0 | £0.01 | ||
| City Index | ✔ | $0 | 0.01 Lots | ||
| CMC Markets | ✔ | $0 | 0.01 Lots |
Advanced Trading Comparison
Do the Bonds and Treasury Yields: How They Are Related offer features that allow for more advanced trading strategies?
| Broker | Automated Trading | Pro Account | Leverage | VPS | AI | Low Latency | Extended Hours |
|---|---|---|---|---|---|---|---|
| IG | Expert Advisors (EAs) on MetaTrader, build your own on ProRealTime | ✔ | 1:30 (Retail), 1:222 (Pro) | ✔ | ✔ | ✔ | ✔ |
| Trade Nation | Expert Advisors (EAs) on MetaTrader | ✘ | 1:30 | ✘ | ✘ | ✘ | ✘ |
| Interactive Brokers | Capitalise.ai, TWS API | ✘ | 1:30 | ✘ | ✔ | ✔ | ✔ |
| Vantage FX | Myfxbook AutoTrade, Expert Advisors (EAs) on MetaTrader | ✘ | 1:30 | ✔ | ✘ | ✘ | ✘ |
| Spreadex | ✘ | ✔ | 1:30 | ✘ | ✘ | ✔ | ✔ |
| City Index | Expert Advisors (EAs) on MetaTrader | ✔ | 1:30 | ✘ | ✔ | ✔ | ✔ |
| CMC Markets | Expert Advisors (EAs) on MetaTrader | ✔ | 1:30 (Retail), 1:500 (Pro) | ✔ | ✘ | ✔ | ✔ |
Detailed Rating Comparison
Use this heatmap to compare our detailed ratings for all of the Bonds and Treasury Yields: How They Are Related.
| Broker | Trust | Platforms | Mobile | Assets | Fees | Accounts | Support | Research | Education |
|---|---|---|---|---|---|---|---|---|---|
| IG | |||||||||
| Trade Nation | |||||||||
| Interactive Brokers | |||||||||
| Vantage FX | |||||||||
| Spreadex | |||||||||
| City Index | |||||||||
| CMC Markets |
Our Take On IG
"IG offers a complete package: an easy-to-use web platform, top-tier beginner education, enhanced charting via TradingView, up-to-date data, and strong trade execution for seasoned traders."Tobias Robinson
Reviewer
Pros
- IG provides a wide range of professional and engaging educational materials, such as webinars, articles, and analyses, tailored for traders.
- The web-based platform supports traders at every level, offering advanced charting tools and real-time market data vital for trading. Additionally, IG now includes TradingView integration.
- IG excels with its diverse instruments, offering stocks, forex, indices, commodities, and cryptocurrencies. Additionally, it provides US-listed futures, options, and an AI Index, ensuring varied diversification opportunities.
Cons
- IG has ended its swap-free account, diminishing its attractiveness to Islamic traders.
- Based on tests, stock and CFD spreads remain less competitive than the lowest-cost brokers, such as CMC Markets.
- In the UK and EU, negative balance protection is available. However, US clients lack account protection and guaranteed stop losses.
Our Take On Trade Nation
"Trade Nation is ideal for novice traders seeking diverse markets on an easy-to-use platform. It offers no minimum deposit, complimentary funding options, and robust educational resources."Tobias Robinson
Reviewer
Pros
- Trade Nation, a highly regarded and well-regulated broker, was formerly known as Core Spreads.
- TradingView can now link with Trade Nation accounts, offering enhanced multi-chart features and direct trade execution capabilities.
- Beginners benefit from a modest initial deposit.
Cons
- Reduced legal safeguards with an offshore entity.
Our Take On Interactive Brokers
"Interactive Brokers ranks highly for seasoned traders due to its robust charting platforms, live data, and bespoke layouts via the new IBKR Desktop app. Its competitive pricing and sophisticated order choices appeal to traders, and its wide equity options are industry-leading."Tobias Robinson
Reviewer
Pros
- The new IBKR Desktop platform combines the top features of TWS with customised tools such as Option Lattice and MultiSort Screeners, providing an impressive trading experience for traders of all skill levels.
- Interactive Brokers has introduced ForecastTrader, a distinctive zero-commission offering. Users trade yes/no Forecast Contracts on political, economic, and climate events with fixed $1 payouts per contract. Benefit from 24/6 market access and earn up to 3.14% APY on held positions.
- A wide range of third-party research subscriptions, both free and paid, are available for traders. Additionally, by subscribing to Toggle AI, traders can receive commission rebates from IBKR.
Cons
- Support can be sluggish and frustrating. Tests reveal that you may face challenges reaching customer service quickly, which could result in delays in issue resolution.
- You are limited to a single active session per account, meaning you cannot use both your desktop programme and mobile app at the same time. This restriction can occasionally lead to a frustrating experience for traders.
- In 2025, IBKR was fined $11.8m by the US OFAC for operating in sanctioned areas. That same year, FINRA imposed a $125k fine for lapses in municipal bond disclosure.
Our Take On Vantage FX
"Vantage is an ideal choice for CFD traders looking for a well-regulated broker with access to the dependable MetaTrader platforms. With a swift sign-up process and a minimum deposit of $50, starting trading is simple and fast."Tobias Robinson
Reviewer
Pros
- The broker recently expanded its range of CFDs, offering more trading opportunities.
- Hedging and scalping strategies are fully permitted without any short-term restrictions.
- Vantage upholds a high trust score through its solid reputation, backed by premier regulation from the FCA and ASIC.
Cons
- To access optimal trading conditions, a substantial deposit of $10,000 is required. This includes a commission of $1.50 per transaction per side.
- It's unfortunate that some clients must register with the offshore firm, which provides reduced regulatory safeguards.
- Based on tests, average execution speeds of 100ms to 250ms are slower compared to other options.
Our Take On Spreadex
"Spreadex attracts UK traders keen on spread betting in financial markets and traditional sports wagers. It offers low fees for short trades, and spread bet profits are tax-free. With a robust charting platform and no minimum deposit, it's easy to begin."Tobias Robinson
Reviewer
Pros
- From testing, the platform facilitates seamless active trading. Features like one-click trading, watchlists, and saved layouts functioned effectively, including Force Open. Constructing a tidy workspace and handling short-term trades proved straightforward.
- During live trials near London, Spreadex exhibited 120–200ms round-trip latency across over 50 FTSE and EUR/USD trades. There were no requotes, and slippage remained largely controlled under normal market conditions.
- Our fee analysis shows the EUR/USD at 0.6 pips during off-peak hours. FTSE and S&P 500 spreads remain competitively priced for spread-betting brokers. Trading costs are reasonable.
Cons
- Spreadex requires real funds initially, offering no demo accounts. Few spread betting brokers neglect to accommodate new traders in this manner.
- Execution is satisfactory, though not top-tier. Tests showed 0.2–0.4 pip slippage in stable liquid markets, but news-induced volatility increased some fills to around 1 pip. Thinner AIM stocks often experienced 2–4 point slippage.
- Spreadex lacks MT4, MT5, cTrader, API, VPS, and algorithmic trading support, making it ideal for active traders rather than those using automated or bespoke trading systems.
Our Take On City Index
"City Index suits active traders perfectly, offering rapid execution speeds averaging 20ms and a customisable web platform with over 90 technical indicators. Its educational resources are exceptional. For UK traders interested in spread betting on 8,500+ instruments tax-free, City Index is an excellent option."Tobias Robinson
Reviewer
Pros
- City Index offers adaptable trading platforms suited to every expertise level. For newcomers, the Web Trader platform is straightforward and user-friendly. For more in-depth analysis and automated features, MetaTrader 4 (MT4) and TradingView are supported, providing a comprehensive trading experience for all traders.
- City Index is under the regulation of leading authorities, such as the FCA in the UK, ASIC in Australia, and MAS in Singapore. Its parent company, StoneX Group Inc., is publicly listed, which enhances its credibility.
- City Index has significantly improved the trading experience. In 2024, they introduced Performance Analytics, providing insights into trades and discipline. The revamped mobile app now includes integrated market research and swipe-access news.
Cons
- City Index does not offer an Islamic account with swap-free conditions, making it less attractive to Muslim traders than brokers such as Eightcap and Pepperstone.
- Unlike brokers like AvaTrade and BlackBull, City Index lacks options for passive trading, such as social copy trading or real ownership of stocks and ETFs. This limitation may reduce its appeal to traders seeking a more hands-off approach.
- Although many brokers, such as eToro, have broadened their crypto offerings, City Index restricts its clients to crypto CFDs. This limited selection may not meet the needs of traders seeking a wider variety of altcoins.
Our Take On CMC Markets
"Equipped with advanced charts and a broad array of tradable CFDs, including an unmatched selection of currencies and bespoke indices, CMC Markets offers an excellent online platform for traders at any level."Tobias Robinson
Reviewer
Pros
- CMC provides competitive pricing with narrow spreads and low trading fees, except for stock CFDs. The Alpha and Price+ programmes offer additional benefits for active traders, including discounts on spreads of up to 40%.
- We've upgraded the 'Assets & Markets' rating due to frequent product enhancements in early 2025. These include extended trading hours for US stocks and the introduction of new share CFDs.
- CMC Markets has introduced an AI News feature. This leverages AI to highlight and summarise market stories instead of executing trades, suggesting the future direction of broker research tools.
Cons
- Although there have been improvements, the online platform still needs further refinement to match the user-friendly trading experience offered by competitors such as IG.
- A monthly inactivity charge of $10 is imposed after a year's inactivity, potentially discouraging occasional traders.
- The CMC Markets app provides a comprehensive trading package; however, its design and user experience lag behind market leaders such as eToro.
Bonds are known by several names in several countries. In the US, Nigeria and some other countries, they are known as Treasury bills and Treasury Notes.
Treasury yields refer to the percentage interest rate that a bond investor can expect to earn for his bond investments. In other words, the treasury yield is the payment on a bond. Treasury yields can fluctuate on the market, even though when an investor buys a bond, the payable rate at which the negotiation is settled on will not change until the bond matures.
Different countries have different yields on their bonds. In addition to the present yield, it is important for investors to know what the annual yield changes have been, and the day to day and month to month changes in the yield rates have also been. This information can make the difference between making money on a bond investment, and buying a bond which will eventually get blown off by falling yields or falling prices as a result of inflationary pressures.
Below is a table showing the treasury yields of different countries.
| Country | |||||||
| Greece |
16.78 |
17.67 |
-0.89 |
20.18 |
-3.40 |
24.34 |
-7.56 |
| Pakistan |
11.45 |
11.55 |
-0.10 |
11.60 |
-0.15 |
12.07 |
-0.62 |
| Kenya |
11.00 |
11.00 |
0.00 |
10.00 |
1.00 |
0.00 |
|
| Vietnam |
10.19 |
10.13 |
0.06 |
9.96 |
0.23 |
0.00 |
|
| Brazil |
9.45 |
9.47 |
-0.02 |
9.97 |
-0.52 |
12.55 |
-3.10 |
| India |
8.13 |
8.15 |
-0.02 |
8.17 |
-0.04 |
8.81 |
-0.68 |
| Turkey |
8.07 |
8.13 |
-0.06 |
8.31 |
-0.24 |
0.00 |
|
| Portugal |
7.57 |
8.02 |
-0.45 |
8.61 |
-1.04 |
12.38 |
-4.81 |
| Russia |
7.33 |
7.41 |
-0.08 |
7.76 |
-0.43 |
6.00 |
1.33 |
| Romania |
6.90 |
6.90 |
0.00 |
6.80 |
0.10 |
0.00 |
|
| Iceland |
6.90 |
6.95 |
-0.05 |
6.96 |
-0.06 |
0.00 |
|
| Peru |
6.76 |
6.76 |
0.00 |
6.76 |
0.00 |
6.76 |
0.00 |
| Hungary |
6.72 |
6.61 |
0.11 |
7.37 |
-0.65 |
7.78 |
-1.06 |
| South Africa |
6.62 |
6.75 |
-0.13 |
6.61 |
0.01 |
8.20 |
-1.58 |
| Colombia |
6.07 |
6.03 |
0.04 |
6.45 |
-0.38 |
7.62 |
-1.55 |
| Indonesia |
5.72 |
5.83 |
-0.11 |
5.98 |
-0.26 |
6.37 |
-0.65 |
| Slovenia |
5.51 |
6.00 |
-0.49 |
6.44 |
-0.93 |
0.00 |
|
| Croatia |
5.42 |
5.42 |
0.00 |
5.47 |
-0.05 |
0.00 |
|
| Mexico |
5.41 |
5.36 |
0.05 |
5.31 |
0.10 |
6.30 |
-0.89 |
| Chile |
5.39 |
5.40 |
-0.01 |
5.42 |
-0.03 |
0.00 |
|
| Spain |
5.39 |
5.79 |
-0.40 |
5.76 |
-0.37 |
5.55 |
-0.16 |
| Philippines |
5.17 |
5.08 |
0.09 |
4.86 |
0.31 |
0.00 |
|
| Ireland |
4.88 |
4.86 |
0.02 |
5.02 |
-0.14 |
8.21 |
-3.33 |
| Italy |
4.79 |
4.93 |
-0.14 |
5.12 |
-0.33 |
5.95 |
-1.16 |
| Poland |
4.48 |
4.60 |
-0.12 |
4.92 |
-0.44 |
5.81 |
-1.33 |
| Israel |
4.07 |
4.10 |
-0.03 |
4.28 |
-0.21 |
4.71 |
-0.64 |
| China |
3.50 |
3.48 |
0.02 |
3.52 |
-0.02 |
3.73 |
-0.23 |
| Thailand |
3.49 |
3.61 |
-0.12 |
3.83 |
-0.34 |
3.39 |
0.10 |
| New Zealand |
3.48 |
3.48 |
0.00 |
3.48 |
0.00 |
4.63 |
-1.15 |
| Malaysia |
3.46 |
3.48 |
-0.02 |
3.48 |
-0.02 |
3.74 |
-0.28 |
| Bulgaria |
3.30 |
3.40 |
-0.10 |
3.85 |
-0.55 |
0.00 |
|
| Australia |
3.13 |
3.17 |
-0.04 |
3.26 |
-0.13 |
4.50 |
-1.37 |
| South Korea |
3.02 |
2.95 |
0.07 |
3.06 |
-0.04 |
3.94 |
-0.92 |
| Qatar |
2.77 |
2.79 |
-0.02 |
3.03 |
-0.26 |
0.00 |
|
| Belgium |
2.43 |
2.41 |
0.02 |
2.65 |
-0.22 |
4.46 |
-2.03 |
| Czech Republic |
2.30 |
2.28 |
0.02 |
2.49 |
-0.19 |
3.25 |
-0.95 |
| France |
2.22 |
2.10 |
0.12 |
2.28 |
-0.06 |
3.32 |
-1.10 |
| Norway |
2.11 |
1.98 |
0.13 |
2.25 |
-0.14 |
2.53 |
-0.42 |
| Austria |
2.05 |
2.01 |
0.04 |
2.06 |
-0.01 |
3.09 |
-1.04 |
| United Kingdom |
1.88 |
1.83 |
0.05 |
1.84 |
0.04 |
2.56 |
-0.68 |
| Finland |
1.85 |
1.80 |
0.05 |
1.89 |
-0.04 |
2.62 |
-0.77 |
| Canada |
1.84 |
1.82 |
0.02 |
1.85 |
-0.01 |
2.37 |
-0.53 |
| Netherlands |
1.80 |
1.78 |
0.02 |
1.85 |
-0.05 |
2.57 |
-0.77 |
| United States |
1.77 |
1.72 |
0.05 |
1.75 |
0.02 |
2.23 |
-0.46 |
| Sweden |
1.66 |
1.56 |
0.10 |
1.56 |
0.10 |
1.95 |
-0.29 |
| Germany |
1.64 |
1.55 |
0.09 |
1.58 |
0.06 |
2.12 |
-0.48 |
| Denmark |
1.62 |
1.56 |
0.06 |
1.68 |
-0.06 |
2.32 |
-0.70 |
| Singapore |
1.33 |
1.32 |
0.01 |
1.48 |
-0.15 |
1.72 |
-0.39 |
| Taiwan |
1.17 |
1.15 |
0.02 |
1.18 |
-0.01 |
0.00 |
|
| Japan |
0.79 |
0.76 |
0.03 |
0.80 |
-0.01 |
1.03 |
-0.24 |
| Hong Kong |
0.78 |
0.78 |
0.00 |
0.81 |
-0.03 |
1.39 |
-0.61 |
| Switzerland |
0.55 |
0.52 |
0.03 |
0.61 |
-0.06 |
1.05 |
-0.50 |
(Source: © 2012 Trading Economics)
The data clearly shows the following information:
a) Treasury yields are not steady, even though the interest rates that bond investors earn on their investments usually do not change.
b) The higher yields are seen with countries where the risk of default is higher. This explains why Greece occupies the number one position on this list.
c) Another factor to look at is the rate of annual change in the treasury yield of a government bond. If we look at this list, we can see that the greatest swings are seen in countries with sovereign debt crises. So Greece, Portugal, Ireland and Brazil are tops in terms of changes in the yields.
Using this information, we can conveniently identify the factors that affect yield rates:
a) Inflation
What does inflation do to bond prices and yield rates? If the inflation rate exceeds the treasury yields that a bond is expected to pay the investor, the obvious effect is that the earnings from the bond will be worth less in future than it would have been. In order to militate against inflation risk, traders should avoid holding bonds for a very long time. With the global uncertainty in the financial markets that have been experienced for some years now, it really makes no sense holding a 30 year bond in this day and age.
b) Credit rating
Credit ratings are used to judge the ability of a bond issuer to pay back. If credit ratings of a bond issuer are low or are cut from higher levels, the treasury yields will have to be increased as an incentive for investors to take a chance on that bond. If ratings improve or the bond issuer is able to access finance to enable it settle its obligations, the treasury yield will fall. This explains why Greece’s bond yields were as high as 24% last year, but has fallen to about 16% as it has accessed bailout money from the ECB and other lenders.
c) Interest rates
If interest rates are increased to a point where it exceeds a bond holder’s yields, investors will flock more to the bond with higher rates and the value of the present bond will drop, leading to a bond’s price being discounted.