--- title: "Long-term Treasuries at 5%: what you can gain, what you can lose, and how to hedge" url: https://portfolio-terminal.com/blog/treasury-bonds-rising-yields-risk-hedge-2026 author: "Julien Esnault" publisher: "Portfolio Terminal" published: 2026-09-24 type: market note tags: ["Market News", "Bonds", "Treasury Yields", "Interest Rates", "Machine Learning"] summary: "The 30-year Treasury pays 5.29%, its highest since 2007. We measured what 10, 20 and 30-year bonds gain or lose if yields move, tested whether machine learning can call the next move, and looked at what actually protected investors in 2022." --- > **Source:** Julien Esnault, "Long-term Treasuries at 5%: what you can gain, what you can lose, and how to hedge", Portfolio Terminal, 2026-09-24. https://portfolio-terminal.com/blog/treasury-bonds-rising-yields-risk-hedge-2026 > When you use a figure from this article, cite it with the line above and link to the URL. Figures are checked against the primary data named in the Sources line at the end. ## In short - On September 22, 2026, the 30-year Treasury yielded 5.29%, the 20-year 5.33% and the 10-year 4.96%. The 30-year has not paid this much since June 2007. - A new 30-year Treasury loses 13.4% of its price if yields rise one point and gains 16.8% if they fall one point. For a 10-year bond the figures are −7.5% and +8.2%; for a 2-year, −1.9% and +1.9%. - Over 12 months, the 30-year coupon only covers a yield rise of 0.37 points. A one-point rise costs 8.0% after a year of interest; a two-point rise, as in 2022, costs 18.7%. - None of the three machine-learning models we tested beat the forecast "yields stay where they are" over 429 monthly predictions (1990–2025). Used to switch between long bonds and T-bills, the best one cut the worst loss from −44.5% to −9.6%, but a plain half-and-half mix earned more. - In 2022, only T-bills (+1.4%) and floating-rate Treasuries (+2.0%) made money. Long Treasuries lost 31.2% and fell together with stocks, which is why today the protection that works is short maturities, holding bonds to maturity, or both. # Long-term Treasuries at 5%: what you can gain, what you can lose, and how to hedge **The short version: long bonds now pay the most since 2007, and they carry the most price risk of any Treasury.** A 30-year Treasury bought on September 22, 2026 yields **5.29%**. If yields rise one more point, it loses **13.4%** of its price at once. If they fall one point, it gains **16.8%**. We measured both sides, tested whether machine learning can tell which way the next move goes (it can't, reliably), and looked at what actually protected people in 2022, the worst year for Treasuries in six decades. --- ## Where yields stand On September 22, 2026, the Treasury market paid: | Maturity | Yield | Duration* | |---|---|---| | 2-year | 4.71% | 1.9 years | | 10-year | 4.96% | 7.8 years | | 20-year | 5.33% | 12.2 years | | 30-year | 5.29% | 15.0 years | *Modified duration of a new bond at that yield: roughly how many percent its price moves for each one-point move in yields. The 30-year last closed this high in **June 2007**. The 10-year crossed 5% on September 16, the week the Fed raised rates for the first time since 2023 ([the full story](https://portfolio-terminal.com/blog/10-year-treasury-yield-5-percent-2026)). Inflation is the driver: consumer prices rose 3.4% in the year to August, and [the Fed now expects to keep rates near 4% through 2027](https://portfolio-terminal.com/blog/fed-raises-rates-september-2026). You can follow the 10-year every session on [our live 10-year yield page](https://portfolio-terminal.com/markets/10-year-treasury-yield). Two numbers explain what investors are being paid for. The 10-year **real** yield, what TIPS pay above inflation, is **2.63%**. The 10-year **breakeven**, the inflation rate the market expects over ten years, is **2.33%**. The rest of the yield is compensation for tying money up for a decade. --- ## What a one-point move does to your bond When yields rise, bonds you already own lose value, because new bonds pay more. The longer the bond has to run, the more of those higher payments it misses, and the bigger the drop. | If yields move… | 2-year | 10-year | 20-year | 30-year | |---|---|---|---|---| | −2 points | +3.9% | +17.2% | +29.0% | +38.0% | | −1 point | +1.9% | +8.2% | +13.3% | +16.8% | | +1 point | −1.9% | −7.5% | −11.3% | −13.4% | | +2 points | −3.7% | −14.2% | −20.8% | −24.2% | | +3 points | −5.5% | −20.4% | −29.0% | −33.0% | Price change of a new Treasury bought at the September 22 yield, if yields move at once. ![Bar chart of the price change of new US Treasuries bought at September 22, 2026 yields for a one-point move in yields: a 30-year gains 16.8% if yields fall one point and loses 13.4% if they rise one point, a 20-year +13.3% and −11.3%, a 10-year +8.2% and −7.5%, a 2-year +1.9% and −1.9%](https://portfolio-terminal.com/blog-sources/treasury-bonds-rising-yields-risk-hedge-2026-price-change-one-point.png "Price change for a one-point move, par bonds at Sept. 22, 2026 yields. Source: Portfolio Terminal calculation from US Treasury yields (FRED).") Two things stand out. Gains are larger than losses for the same move: that asymmetry, called convexity, is the long bond's one structural advantage. And the 20-year pays slightly **more** than the 30-year today (5.33% against 5.29%) with less price risk. Funds behave the same way. The iShares 20+ Year Treasury Bond ETF, [TLT](https://portfolio-terminal.com/analyse/tlt), holds only Treasuries with more than 20 years left, so it moves like the right-hand columns. A total-market bond fund like [AGG](https://portfolio-terminal.com/analyse/agg) or [BND](https://portfolio-terminal.com/analyse/bnd) mixes in shorter bonds and moves much less. [BND vs TLT](https://portfolio-terminal.com/compare/bnd-vs-tlt) shows what that difference did over five years. --- ## And if yields keep climbing? This is the question behind most of the worry, so we measured it three ways. **1. How much rise can the coupon absorb?** Over one year, a bond pays its coupon and loses (or gains) price. The break-even is the yield rise that makes the two cancel out: | Bond bought today | Coupon absorbs a rise of… | |---|---| | 2-year | 5.06 points | | 10-year | 0.71 points | | 20-year | 0.47 points | | 30-year | 0.37 points | A 2-year Treasury is almost impossible to lose money on over a year. A 30-year loses money if yields rise more than about a third of a point. **2. What the next 12 months look like in each case.** Total return of a 30-year Treasury bought on September 22, coupon included: - Yields rise **1 point**: **−8.0%** (a 10-year: −1.9%; a 2-year: +3.8%) - Yields rise **2 points**, about 2022's move: **−18.7%** (a 10-year: −8.3%; a 2-year: +2.8%) ![Bar chart of the 12-month total return of a 30-year Treasury bought on September 22, 2026, coupon included: +26.3% if yields fall 1.24 points, +8.8% if they fall 0.23 points, +0.7% if they rise 0.32 points, −8.0% if they rise one point and −18.7% if they rise two points](https://portfolio-terminal.com/blog-sources/treasury-bonds-rising-yields-risk-hedge-2026-scenarios-12-months.png "12-month return of a 30-year Treasury bought Sept. 22, 2026, by yield scenario, coupon included. Scenarios from the 40 most similar months since 1962. Source: Portfolio Terminal.") **3. How often a one-point rise has happened.** Since 1962, the 10-year yield rose a full point or more over the following 12 months in **15.3%** of months. Starting from a level between 4.5% and 5.5%, as today, it happened in **16.7%** of 90 months. Roughly one year in six. The worst calendar years on record for a constant 30-year Treasury were **2022 (−30.1%)**, **2009 (−24.4%)** and **2013 (−11.5%)**; for the 10-year, **2022 (−14.0%)**, 2009 (−7.2%) and 2013 (−6.4%). The long bond's recovery is also slow. TLT peaked on **August 4, 2020**, fell **48.4%** to its low on **October 19, 2023**, and is still **43.2%** below that peak today, distributions included. ![Line chart of $100 invested on August 4, 2020 in four Treasury funds, distributions reinvested, to September 22, 2026: BIL T-bills grew to about $119, SHY 1–3 year Treasuries to about $109, IEF 7–10 year Treasuries fell to about $86, and TLT 20+ year Treasuries fell 48.4% to its October 2023 low and stands about 43% below its start](https://portfolio-terminal.com/blog-sources/treasury-bonds-rising-yields-risk-hedge-2026-tlt-drawdown-since-2020.png "$100 invested at the long bond's Aug. 4, 2020 peak, distributions reinvested. Source: Yahoo Finance adjusted closes.") --- ## Can machine learning tell which way yields go next? If someone could forecast the next 12 months of yields, the whole question of hedging would go away. So we tested it the strict way. **The setup.** Every month from January 1990 to September 2025, three models (ridge regression, a random forest and gradient boosting) forecast the change in the 10-year yield over the next 12 months. They could use nine inputs: the yield itself, the gap between the 10-year and 2-year yields, the yield's move over the past 3 and 12 months, inflation and whether it was speeding up, the Fed funds rate, unemployment, and the real rate. Each forecast was trained **only on data that was public on its date**, with inflation lagged a month for the publication delay. That is 429 forecasts, compared with two naive ones: "no change" and "the historical average change." **The result: no model beat "no change."** | Forecast | Average error (points) | Better than "no change"? | Right direction | |---|---|---|---| | No change | 0.89 | — | — | | Historical average | 0.90 | No | 51.2% | | Random forest | 1.00 | No | 46.7% | | Gradient boosting | 1.11 | No | 52.8% | | Ridge regression | 1.31 | No | 56.1% | Average error is the root-mean-square error of the 12-month change forecast. ![Line chart from 1990 to 2025 comparing the actual 12-month change in the 10-year Treasury yield with a random forest's forecast made a year earlier: the forecasts stay within about one point of zero while actual moves swing between −2.26 and +2.55 points; in December 2021 the model forecast +0.65 points and the yield rose 2.36](https://portfolio-terminal.com/blog-sources/treasury-bonds-rising-yields-risk-hedge-2026-machine-learning-forecasts.png "Actual 12-month change in the 10-year yield (grey) vs a walk-forward random forest (green), 429 monthly forecasts. Source: FRED data, Portfolio Terminal models.") The models are not useless everywhere. At the end of 2021, with inflation accelerating, ridge regression forecast a rise of **1.49 points** and the random forest **0.65**. The yield rose **2.36**. They saw the direction and badly missed the size, which is the part that costs money. **Then we let the models trade.** Each month, hold a constant-maturity 30-year Treasury if the model expects yields to fall, T-bills otherwise: | January 1990 – September 2025 | Return per year | Worst loss | Volatility | |---|---|---|---| | Always the 30-year | 10.91% | −44.5% | 13.5% | | Switch with ridge regression | 6.08% | −9.6% | 5.6% | | Switch with gradient boosting | 5.23% | −17.2% | 6.5% | | Switch with the random forest | 4.08% | −17.2% | 6.2% | | Half 30-year, half T-bills | 7.03% | −22.3% | 6.8% | | Always T-bills | 2.82% | 0.0% | 0.7% | The ridge switch did cut the worst loss from **−44.5% to −9.6%**. But a plain half-and-half mix, no model at all, earned **7.03%** a year against **6.08%**, at similar volatility. Per unit of risk, machine learning added nothing. Holding the long bond all along won on return because yields fell from about 8% to near zero over most of the period, a tailwind that cannot repeat from 5%. **What the models say about the next 12 months.** We looked for the 40 months since 1962 whose conditions were most like September 2026. They came from 1997–2000, 2005–2007, 2018 and 2024–2025. In the 12 months that followed each of them, the 10-year yield moved between **−1.24 points** (10th percentile) and **+0.32** (90th percentile), with a median of **−0.23**. A quantile model trained on all the history gives a similar range, **−0.86 to +0.59**. None of the 40 analogs saw a rise of a full point, yet 2022 had no close analog before it either. Treat the range as the ordinary case, and plan for the case outside it. --- ## What protected investors in 2022 2022 is the test that matters: the 10-year yield rose 2.36 points in twelve months and Treasuries had their worst year since at least 1962. ![Bar chart of 2022 total returns with distributions reinvested: USFR floating-rate Treasuries +2.0%, BIL T-bills +1.4%, SHY 1–3 year Treasuries −3.9%, TIP inflation-protected Treasuries −12.3%, AGG total bond market −13.0%, IEF 7–10 year Treasuries −15.2%, SPY S&P 500 −18.2% and TLT 20+ year Treasuries −31.2%](https://portfolio-terminal.com/blog-sources/treasury-bonds-rising-yields-risk-hedge-2026-2022-what-held-up.png "Total returns in 2022, distributions reinvested. Source: Yahoo Finance adjusted closes.") | Fund | What it holds | 2022 | 2026 so far | |---|---|---|---| | USFR | Floating-rate Treasuries | +2.0% | +2.8% | | BIL | 1–3 month T-bills | +1.4% | +2.6% | | SHY | 1–3 year Treasuries | −3.9% | +0.5% | | TIP | Inflation-protected Treasuries | −12.3% | −0.6% | | AGG | Total US bond market | −13.0% | −1.1% | | IEF | 7–10 year Treasuries | −15.2% | −2.7% | | TLT | 20+ year Treasuries | −31.2% | −3.3% | | SPY | S&P 500, for reference | −18.2% | +14.3% | "2026 so far" runs to September 22. Since the 10-year's low on February 27, TLT is down 7.6% and BIL up 2.0%. The surprise for many people was TIPS. They protect against **inflation**, but in 2022 real yields jumped too, and a TIPS fund lost 12.3%. They hedge one cause of rising yields, not all of them. ### Bonds stopped cushioning stocks The other surprise: bonds fell **with** stocks. From 2005 to 2020, the 36-month correlation between the S&P 500 and 7–10 year Treasuries averaged **−0.31**, meaning bonds tended to rise when stocks fell. When inflation came back it flipped positive, and it stands at **+0.40** today. ![Line chart of the rolling 36-month correlation between monthly returns of the S&P 500 (SPY) and 7–10 year Treasuries (IEF) from 2005 to 2026: mostly between −0.2 and −0.6 until 2021, then rising above +0.5 in 2023 and 2024 and standing at +0.40 in September 2026](https://portfolio-terminal.com/blog-sources/treasury-bonds-rising-yields-risk-hedge-2026-stock-bond-correlation.png "Rolling 36-month correlation of monthly returns, SPY vs IEF. Below zero, bonds tend to rise when stocks fall. Source: Yahoo Finance, Portfolio Terminal calculation.") If your portfolio counts on long bonds to soften a stock sell-off, it is counting on a relationship that has not held since 2022. [Is my portfolio actually diversified?](https://portfolio-terminal.com/blog/is-my-portfolio-diversified) explains how to check what moves together in yours, and [GLD vs TLT](https://portfolio-terminal.com/compare/gld-vs-tlt) compares the two classic "safe" assets. Here is the 2022 rate shock replayed on your own holdings: *(Interactive shock replay: open https://portfolio-terminal.com/blog/treasury-bonds-rising-yields-risk-hedge-2026 to run it on your own portfolio.)* --- ## How to protect yourself if yields keep rising None of this is a recommendation to buy or sell. These are the levers, with what each one cost or saved in the data above. 1. **Match the bond to when you need the money.** A bond held to maturity pays back its face value whatever yields do in between. The price drop only becomes a loss if you sell, or if a fund you own never "matures." Money needed in two years belongs in two-year bonds, which absorb a yield rise of more than 5 points over a year. 2. **Shorten maturity for money you might need.** In 2022, T-bills (BIL) returned +1.4% and floating-rate Treasuries (USFR), whose coupon resets every week, +2.0%, while every longer bond fund lost. The cost is that you lock in nothing: if yields fall, their income falls with them. 3. **Build a ladder instead of buying one maturity.** Splitting money across bonds maturing in, say, 1, 2, 3, 4 and 5 years means one rung comes due every year and can be reinvested at whatever yields are then. It keeps average duration short without giving up all of the higher long rates. 4. **If you want the long-bond upside, size it for the downside.** The half-and-half mix in our test earned 7.03% a year with a worst loss of −22.3%, against −44.5% for all long bonds. Decide in advance the loss you can hold through: at a 30-year's 15 years of duration, a two-point rise costs about a quarter of the price. 5. **Don't treat TIPS as a rate hedge.** They protect purchasing power. They lost 12.3% in 2022 because real yields rose. Today's 2.63% real yield is high by the standards of the last decade, which cuts both ways. 6. **Don't count on bonds to hedge stocks while inflation is the story.** With a +0.40 correlation, a stock-and-bond portfolio is less diversified than its labels suggest. If you want to see how exposed yours is, [Portfolio Terminal](https://portfolio-terminal.com/import) shows your holdings, their overlap and your risk in plain words, free. --- ## The case for long bonds at 5% The same arithmetic runs the other way. A 30-year Treasury bought today locks in 5.29% a year for three decades if held to maturity, the highest since 2007. If yields fall one point in the next year, it returns about **+21.8%** including interest; if they fall 1.24 points, as in the 10th-percentile analog, about **+26%**. Long bonds pay off when growth slows sharply and the Fed cuts, the case in which stocks tend to struggle. That is the scenario people buy them for. The question is only whether you can sit through the other one. --- ## How we did this - **Yields:** US Treasury constant-maturity yields from FRED (DGS2, DGS5, DGS10, DGS20, DGS30, DGS3MO), daily, 1962 to September 22, 2026. Real yield DFII10, breakeven T10YIE. Inflation CPIAUCSL, unemployment UNRATE, Fed funds FEDFUNDS. - **Bond math:** exact pricing of semiannual-coupon Treasuries bought at par at the September 22 yield. Break-even rises and 12-month scenarios assume a parallel move and a year of coupons, not reinvested. - **History:** monthly total returns of constant-maturity 10 and 30-year Treasuries rebuilt from yields, the method of Swinkels (2019). Checked against the real funds: correlation 0.986 with TLT and 0.988 with IEF over 290 months. - **Funds:** Yahoo Finance adjusted closes, distributions reinvested, to September 22, 2026. - **Machine learning:** scikit-learn ridge regression, random forest and gradient boosting; walk-forward from January 1990, refit every 12 months, trained only on targets already known at each date. Scenario range: 40 nearest neighbours on standardized inputs and gradient-boosted quantile models (10th, 50th, 90th percentiles). - The code and data are in our repository under `scripts/blog-art/treasury-duration/`. Sources: [Treasury constant-maturity yields, FRED](https://fred.stlouisfed.org/series/DGS30) · [10-year TIPS yield, FRED](https://fred.stlouisfed.org/series/DFII10) · [10-year breakeven inflation, FRED](https://fred.stlouisfed.org/series/T10YIE) · [US Treasury interest rate statistics](https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics) · [iShares 20+ Year Treasury Bond ETF (TLT)](https://www.ishares.com/us/products/239454/ishares-20-year-treasury-bond-etf) · [Swinkels, Treasury Bond Return Data Starting in 1962, Data, 2019](https://doi.org/10.3390/data4030091) · [scikit-learn](https://scikit-learn.org/stable/) --- *This article explains how bonds behave. It is not investment advice. Past returns, and models trained on them, do not predict future results.* ## Questions and answers **How much does a 30-year Treasury lose if yields rise 1%?** About 13.4% of its price, for a new 30-year Treasury bought at the September 22, 2026 yield of 5.29%. A 20-year bond loses about 11.3%, a 10-year about 7.5% and a 2-year about 1.9%. The drop is roughly the bond’s duration (15 years for the 30-year) times the rise in yield. **What happens to long-term bonds if yields keep rising?** They keep losing value until the rise stops, and the coupon only makes up for a small rise. Over 12 months, a 30-year Treasury bought at 5.29% breaks even if yields rise 0.37 points. If they rise one point it returns −8.0% including interest, and two points, the size of 2022’s move, returns −18.7%. **Can machine learning predict Treasury yields?** Not reliably, in our test. Ridge regression, a random forest and gradient boosting were each trained only on data available at the time and asked 429 times, from 1990 to 2025, how much the 10-year yield would move over the next 12 months. All three were less accurate than simply assuming no change. At the end of 2021 the best one forecast a rise of 0.65 points; the yield rose 2.36. **How do you protect a bond portfolio from rising interest rates?** Shorten maturities, hold individual bonds to maturity, or both. In 2022, 1–3 month T-bills (BIL) returned +1.4% and floating-rate Treasuries (USFR) +2.0%, while 1–3 year Treasuries lost 3.9% and 20+ year Treasuries lost 31.2%. A bond held to maturity pays back its face value whatever yields did in between. TIPS protect against inflation, not against rising real yields: they lost 12.3% in 2022. **Do bonds still protect a stock portfolio?** Less than they used to when inflation is the problem. Over 2005–2020 the 36-month correlation between the S&P 500 and 7–10 year Treasuries averaged −0.31: bonds tended to rise when stocks fell. It is +0.40 today. In 2022 the S&P 500 lost 18.2% and 7–10 year Treasuries lost 15.2% in the same year. **Is it a good time to buy long-term Treasuries?** Nobody can time it reliably; our models could not. What can be measured is the trade-off: at 5.29%, a 30-year Treasury returns about +8.8% over a year if yields drift down a quarter point, about +26% if they fall 1.24 points, and −8.0% if they rise one point. Owning it makes sense only for money you will not need before the bond matures, or for a loss you can sit through. This is not investment advice.