The 10-year Treasury yield is near 5%: what that means for stock valuations

The 2-year yield, more closely tied to the Federal Reserve's policy setting, stood at 4.6% on the same date, down from 4.7% the previous reading and up from 3.6% a year earlier. The gap between the two, the 10-year/2-year spread, held steady at 0.4% on 30 October, matching the 0.4% points the previous reading, though it remains narrower than the 0.5% points recorded a year earlier.

Why yields have risen

The Federal Reserve's target rate, the overnight rate the central bank sets directly, has held at an upper bound of 4.0% across the readings covered here, unchanged from 4.0% the prior reading and from 4.0% a year ago. That means the climb in the 10-year yield from 4.1% to 5.0% has occurred without any change in the Fed's own setting, which points to forces further along the curve: investors' expectations for growth, inflation, and the term premium demanded for holding longer-dated debt. Inflation expectations embedded in 10-year breakeven rates have moved only modestly over the same period, from 2.3% a year ago to 2.3% on 30 October, down from 2.4% the previous reading. The size of the move in long-term yields is larger than the shift in breakeven inflation alone would account for; the data available here do not identify what has driven the remainder.

What it means for value

A Treasury yield is the starting point for the discount rate used in a discounted cash flow model, the rate at which a company's projected future cash flows are reduced to a present value today. When the risk-free rate rises, the discount rate applied to those projections typically rises with it, and the arithmetic of discounting means the effect compounds the further into the future a cash flow sits. That makes the effect sharper for businesses whose value depends heavily on growth or cash generation many years out, rather than on cash already being produced.

Our model's sensitivities for three power companies show the range this can take. A one percentage point rise in the discount rate would send Public Service Enterprise Group's modelled value down 55.4%, NRG Energy's down 47.5%, and Constellation Energy's down 41.4%. All three are capital-intensive generators whose plant and contracted output extend value well into the future, and the three figures are not identical: Public Service Enterprise Group's model is the most sensitive of the three to this single input, Constellation Energy's the least. These are model values under stated assumptions, not a comparison with the share price. Full financial histories for Public Service Enterprise Group, NRG Energy and Constellation Energy are on their company pages.

What it means for savers and borrowers

For savers, the rise in yields over the past year has lifted the returns available on cash-like instruments, money-market funds and newly issued bonds. The Fed's own target rate, which anchors many deposit rates, has stayed at 4.0% throughout, so most of what savers have seen change is coming from the longer end of the market rather than from the Fed's setting itself. For borrowers, the clearest read-through is in mortgages: the 30-year fixed rate was 7.2% on 29 October 2026, down from 7.3% the previous reading but up from 6.2% a year earlier, a Freddie Mac figure via FRED. That higher cost of new borrowing feeds directly into the monthly payment on any mortgage taken out or refinanced now compared with a year ago, even as the most recent reading has eased slightly from the one before it.

What to watch next

The next scheduled releases that could move yields are the October jobs report on 6 November 2026 from the Bureau of Labor Statistics, October consumer price inflation on 10 November 2026, also from the Bureau of Labor Statistics, and the October personal income and PCE inflation report on 25 November 2026 from the Bureau of Economic Analysis. Each will add to the growth and inflation data that the 10-year yield is currently pricing.