Why Every Investor Is Getting Nervous About The 5 Percent Yield

Added: 2026-05-26

[00:00:00]This past Tuesday, May 19th, something happened in the bond market that caught everyone's attention on Wall Street and plenty of people even on Main Street.

[00:00:08]For the first time in almost 19 years, Treasury yields on 30-year Treasury bonds eclipsed 5%. And while stock market normally determines headlines and most people think of the bond market like that sleepy old guy in the corner who just kind of goes about his business, what happens in the bond market actually has a much bigger and more direct effect on all markets, which means it has huge implications for the economy as a whole and for your wallet right now. So, let's talk about why.

[00:00:36]This isn't just some number on a trader screen. It's directly connected to the interest rate on your mortgage, your car loan, and your credit card.

[00:00:45]It affects the performance of things like your 401k. It changes whether holding cash is a smart move or a losing bet. And the rules of money that have worked for the last 15 years are actually being rewritten in real time.

[00:00:58]So, we're going to break down exactly what this 5% would mean for your wallet, your retirement, and your daily life.

[00:01:05]So, let's start with what these Treasury yields even are. US Treasuries in general are loans made by you to the US government. The US Treasury borrows your money and then it promises a yield or an interest rate that it's going to pay you back over the course of the loan, usually every 6 months.

[00:01:23]And there are different types of Treasuries that just have different lengths of time you're lending out your money. Treasury bills, which you'll most likely hear people on Wall Street call T-bills, are short-term. They can be any anywhere from a few days to a year. And they're sold at a discount, so your profit comes from the difference they pay you at maturity.

[00:01:41]Notes are medium-term loans, anywhere from 2 to 10 years. And Treasury bonds, which everyone is so concerned about right now, are those long-term 20- or 30-year loans. And the 30-year Treasury is the one that's just gone above 5%.

[00:01:57]And I know that doesn't sound super interesting, but it matters for the entire global economy because the US government is considered the safest borrower on the planet.

[00:02:08]The return you get on a US Treasury is considered and is literally called the risk-free rate in investing.

[00:02:15]Translation, you basically take no risk.

[00:02:19]Well, you take no perceived risk when you invest in US Treasuries. So, the return on anything else you invest in has to be higher or else why would you invest in it? There has to be a greater return if you're wanting to take greater risk.

[00:02:36]So, it serves as the foundation for almost every other interest rate and investment return out there. And for years, that rate has been near zero.

[00:02:46]After the 2008 financial crisis, central banks kept rates incredibly low to encourage spending and borrowing. But that era looks like it's coming to an end.

[00:02:56]The main reason? You probably guessed it, inflation.

[00:02:59]To fight the highest inflation we've seen in about 40 years, the Federal Reserve aggressively raised its core interest rate starting in 2022, which forces other rates like Treasury yields to go up, too.

[00:03:12]But it's not just the Fed. It's the value of all bonds overall. And it operates like a simple seesaw.

[00:03:20]One side is bond prices and the other side is bond yields. When one goes up, the other has to go down and vice versa.

[00:03:29]And that feels counterintuitive because you would think if the price of something goes up, doesn't that make their value go up? But it starts to make sense when you think about behavioral economics and think about the fact that these are loans.

[00:03:41]Let's take it this way.

[00:03:43]If someone were to ask you for a $100 loan, but they said they'd give you $103 back, that's great. Congratulations, you earned 3% on your money.

[00:03:52]But let's say that same person went to your friend a few months later and asked them for $100, too.

[00:03:59]But, this time they told that friend that they'd give them $105 for their loan.

[00:04:05]That friend just made 5%. So, who came out better at the end?

[00:04:09]Your friend.

[00:04:11]Their loan is worth 5% while yours is only worth three. The yield went up on their bond, so yours becomes less valuable.

[00:04:20]As new bonds are issued at higher rates, existing bonds become less valuable in the market and vice versa. It's literally a seesaw.

[00:04:28]And the reason yields hit that 5% mark on Tuesday is that investors are now worried about more rate hikes because of the Iran war and the increase in concern about the government's ability to even service and pay back these loans. So, investors are actually starting to port out of Treasury bonds, meaning the yield has to get more attractive to get people to buy them. So, why does a 5% rate on Treasury bonds cause such a shock as opposed to anytime there's an increase?

[00:04:58]The reason is that it creates a domino effect that lands right on your doorstep, and 5% is actual actually a really important behavioral number that starts to affect things on a grander scale.

[00:05:11]First and foremost, it starts with loans.

[00:05:14]The 10-year Treasury yield directly influences mortgage rates. Now, 10 years didn't hit 5% like the 30-year did, but they still went up. And as the yield climbed, mortgage rates climbed, too, getting closer to 7%, making home ownership drastically more expensive.

[00:05:31]A family that could afford a home a few years ago is now completely priced out.

[00:05:37]Even people actively looking for homes now are having to reassess what they can afford.

[00:05:42]Today, the national average on a 30-year mortgage is around The last time I checked is around 6.58% on a $500,000 loan. That's about $3,100 a month. That's a lot of money.

[00:05:55]Compare that to the cheap borrowing days where rates were around around let's say 3.5% right before they started raising rates in 2022.

[00:06:05]That translates to a monthly payment on the same $500,000 of just over 2,200.

[00:06:12]Now, that's still a lot of money, but 3,100 of the month versus 2,200 a month, that's a big difference. That's $900.

[00:06:20]$11,000 a year.

[00:06:22]And people who bought homes pre-2022 who would otherwise maybe be looking to move, maybe be looking to get into a different nicer house, hopefully that would be happening so that we would create more inventory and buying momentum in the industry, but people are staying put because they've got what you may have heard referred to as golden handcuffs on their sub-3% loans. There are people sitting at two, two and a half, 3% on current mortgages and they can't stomach or they can't afford what an increase would look like to buy a new house at these five, six, maybe sub-7% rates. Rates continuing to go up makes this affordability problem even worse.

[00:07:08]And the same pressure applies to car loans and credit card rates, even though I would implore you to do everything you can to stay away from credit card debt, but it's making all forms of debt more burdensome and chipping away at people's monthly budgets.

[00:07:23]Next is your retirement account.

[00:07:25]For the last decade with bond yields offering almost nothing, stocks were the only real option for growth. You actually may have heard it, people would use the acronym TINA, which means there is no alternative.

[00:07:38]But poor sweet TINA may be dead.

[00:07:40]When you can get a nearly guaranteed 5% from a government bond, it makes you think twice about the risks of the stock market. And this puts immense pressure on stock prices, especially these high-flying tech companies that have powered the market for years. Large-cap tech has massively outperformed the rest of the market over the last 10 to 15 years, which is why so much of what you see from influencers and finance gurus online has basically been "Throw your money in an ETF and see it grow."

[00:08:12]Because for the last 15 years, that's kind of been true as long as you were invested in the broad market and got that large-cap tech exposure. But if I asked you what the value of a stock is based on, what would you actually say?

[00:08:26]The value of a stock is based on its future profits, not what it's done in the past, but what people think it will do into the future. And higher interest rates make those future profits worth less today.

[00:08:40]This is a huge reason why people's investment accounts may start to struggle. And maybe when I say struggle, not necessarily go down, but not have the crazy high returns that we've seen the last few years.

[00:08:53]And I'm actually really surprised that the market on Tuesday didn't respond with a stronger pullback. And it's possible investors are waiting to see how things play out in Iran since Trump did announce that he called off some sort of attack on them, but I would have really expected a stronger reaction to stock prices overall on this bond yield news.

[00:09:14]So, I'm I'm kind of surprised, and I think it it might be investors taking a short-term wait-and-see approach, but that's not going to work, and that's not not going to keep going long-term if we see this stay at elevated rates and elevated prices for a long period of time. And from what's happening in the economy, there's nothing that I would point to to say, "Yeah, it was a quick spike, but it's going to come back down."

[00:09:40]Then there's your own bond funds, your own bond exposure. You might think higher yields are good, and for new money, they are. But if you already owned bonds or a bond fund, you've watched its value fall. Remember the seesaw. As yields rise, the price of existing bonds with lower yields go down.

[00:09:58]But there is a silver lining. Well, there may be a silver lining. Cash. For years, cash and savings accounts, even high-yield savings accounts that a lot of people have touted, haven't kept up with inflation.

[00:10:10]It's been a losing game.

[00:10:12]Now, cash might be a contender.

[00:10:15]High-yield savings accounts and money market funds are finally starting to offer some attractive rates. Right now, they're either promotional or they're ticking up at a lower rate than what we've seen other rates come in, but it is in a more advantageous place to park your money than it was even a few months ago, and earn a real return. But even that is deeply dependent on where inflation numbers continue to come in, and dependent on people's specific goals and situations. So, this one is cash might come back to a good spot, but I wouldn't be rushing to go open a high-yield savings account just because of this and just because of some things you may have seen from other people online.

[00:10:57]So, what should you do in a world where 5% yields in the bond market could be the new normal? And I would actually say the old normal, cuz historically, these are where yields and interest rates used to be. But the environment and the economy has changed significantly in that time.

[00:11:13]But in these moments, the best investors do not panic, and they don't respond emotionally to this type of economic shift. But I think we're likely to see several changes to the current norms.

[00:11:25]First, prioritizing quality, which frankly has not necessarily been the case over the last 15 to 20 years.

[00:11:34]If yields stay elevated and inflation gets even worse, even more out of out of hand, the era of betting on exciting companies and giving insane valuations to businesses without ever turning a profit is going to come to an end.

[00:11:49]Warren Buffett's famous old saying that only when the tide goes out do you discover who's been swimming naked might be true because we might see the tide start to go out a little bit and we're going to see a lot of people rushing to put on some clothes.

[00:12:01]With money no longer cheap and the hope of it getting back to those cheaper levels getting more and more dim, the market is going to have to start rewarding businesses with strong fundamentals. And by fundamentals, I mean companies with consistent profits, low debts, and the ability through their business model and through their customer base to withstand inflation and higher prices without losing customers at large.

[00:12:26]But, that also could mean an extended period of lower market gains. Still positive overall, very likely, maybe not, nobody can predict the future and if they say that they can, please run away from them.

[00:12:37]But, not at the level we've become accustomed to over the last two decades.

[00:12:42]Second, we're already starting to see it happen, but people are going to rethink their bond exposure. People will probably start favoring short-term bonds, which are far less sensitive to rate changes and let people take advantage of higher yields sooner instead of locking up money in 30-year government loans. Third, cash may once again, as we just talked about, be labeled as king. Holding a portion of a portfolio in a high-yield savings account could get more attractive because the concerns of its value eroding as as inflation rises may not be the case anymore unless we get into a hyper-inflationary environment, in which case leaving a big stockpile of cash is actually a really bad idea.

[00:13:23]And if it provides a competitive safe return and it gives people dry powder, we could see more cash on the sidelines even from higher net worth and institutional investors while people wait to invest to see if there are buying opportunities that arise in a down market or at least in a shakier market. Finally, the paradigm might shift, but the best investors aren't going to give up on stocks. History shows that stocks can still perform well when rates are higher, but the market leaders often change. The key is to understand how the investing playbook has or will change. Success will be a lot harder in this environment because people won't be able to just ride the wave of cheap money, and it'll be a lot harder for groups like private equity and VC firms to bounce back from failures. But what does that all mean for you?

[00:14:13]In short, life isn't going to get less expensive anytime soon, and there continues to be pressure on household spending. Market returns might also change over the next several years.

[00:14:25]We've seen insane valuations, huge double-digit returns multiple years in a row, all funded by a flood of cheap money that has and is continuing to dry up.

[00:14:37]So, if you're trying to be wise with your finances, if you're looking to build a nest egg or take out a loan for your business or whatever it may be, I would caution you against relying on the norms that we've all gotten used to since 2007 as guarantees for what's going to keep going in the future.

[00:14:54]And please, be careful who you take advice from.

[00:14:59]If you're relying on things you're seeing online or prompts you're putting into an AI chatbot or a product salesman coming to you with some magical perfect insurance product, I'm going to do a whole other thing on that later on.

[00:15:13]Make sure you understand the risks of what you're doing and do the math yourself or find someone who can help you do it. I have seen so many people online and otherwise make false claims about how to invest, about what products to buy, what to invest in, where you should put your money, how you should be using it. And if you take the 5 minutes to run their scenarios and advice through the basics of math, you realize how crazy, unreliable, and nonsensical a lot of the suggestions are that are out there right now.

[00:15:53]The brief trip above 5% wasn't just a blip on a chart, and it does affect you in real time.

[00:16:00]It was a wake-up call for Wall Street, and it's going to trickle down into a wake-up call for Main Street, for people who are not prepared.

[00:16:08]The era that defined the last 15 years, near zero interest rates, super cheap money, a lot of buying power for a lot of people, is going to come down.

[00:16:19]The consequences are hitting mortgage rates, retirement accounts, pensions, monthly budgets, even institutional investors, Wall Street. Everyone is feeling this, and everyone is paying attention to it, because the ripple effects are very real, and people understand what it means if you pay attention to it.

[00:16:38]But a world with real interest rates is not a disaster, either. I don't want this to feel Chicken Little or fear-mongering, because it's actually a return to an old normal. It's a world that rewards saving and smart investing, not just speculation, not just throwing money into an ETF, and magically it makes you money no matter what. That's not real.

[00:17:02]But understanding this new reality is the single most important step you can take to protect and grow your wealth in the decades to come.

[00:17:10]And it's also really important to understand that most of the time, when people want to reach their goals, when we talk about investing, whether it be stocks or bonds or otherwise, these are long-term plays, which means what happens in the bond market on a 30-year Treasury definitely affects you in the here and now, but it should not be a primary driver for the long-term investment decisions that you make because things change, the organism that is the macro global economy changes and shifts so much over decades. And that's what I always tell people, if you are investing for decades, take it decades at a time, not minute by minute, not reacting to every headline. Pay attention, understand what this means for the economy, educate yourself so that you understand what it is your investments are doing and what could be coming down the line. Don't do fear-based tactics, and whatever you do, if someone is selling you a product, selling you advice, selling you on anything, if they are preying on your emotions, stop and take a minute to figure out, are they doing this for you or are they doing this for them? Your emotions are there as flag posts, your emotions are there to help you identify things you should key into, but don't use them as the main driver for your decisions about your money.

[00:18:36]Math, objectivity, and help from trustworthy advisers is where I would start. And as we come to the end, if you followed me, you know that I always end with a biblical frame, so this is for the people out there who believe and trust and follow Jesus. And the first thing that I would say, I have two. First thing I would say is from a very practical place.

[00:18:59]Money is getting more expensive, which means borrowing is getting more expensive, which means homes and cars and credit cards are more expensive.

[00:19:09]Do not overextend yourself and then blame the economy.

[00:19:15]We are all prisoners of our own timeline.

[00:19:18]And I say that in a good way. I say that in the sense that God has placed you in the here and now. He knew exactly what the economy was going to be doing. He knew exactly what your paycheck would look like. He knew exactly what every piece of your circumstances are and he ordained it.

[00:19:39]Now, that doesn't mean that you are absolved of any responsibility to make necessary changes if you have made poor financial choices. If you have prioritized wants over needs. If you have taken on debt to fund a lifestyle you cannot afford. But what I see more and more as money is getting more expensive, as it is harder to buy the home, the dream home that you may want, as it is harder to pay for the fancy luxury big SUV, the truck, car, whatever it is that comes to mind that you want, as it is easier and credit card companies continue to make it very easy for people to borrow from them because they're not a charity, they're not a non-profit, they're there to make money and the way that credit card companies make money is through interest.

[00:20:30]And if you've ever said This is kind of a side note.

[00:20:32]If you are a big credit card points person and I'm not necessarily against credit card points, but if you're a big credit card points person, stop and ask yourself how that's because a credit card company isn't doing it to pat you on the back.

[00:20:47]They're doing it to keep you borrowing and they're doing it off the backs of people with massive credit card debt who have to pay interest, insane amounts of interest on that debt.

[00:21:00]They're not doing it out of the goodness of their hearts, but I digress.

[00:21:04]Going back to my original point.

[00:21:07]Money being expensive is not an excuse to tie yourself up and tie your family up in debt you cannot afford.

[00:21:19]Nothing about that is biblical. Nothing about that is wise. And every conversation I have with people who feel like they're drowning, people who cannot get it together with their spending, people who do not know how they're going to go month to month, how they're going to make it. And I'm talking about people who make six-figure incomes or more are people who have tied themselves up in debt that they cannot get out of or that they flat out refuse to get out of even though they could.

[00:21:47]That is poor and unwise stewardship. We are called to something better, which leads me to my second point. And I've said this before.

[00:21:57]How you spend your money is a witness to what you believe about God. And how you react to situations like this is also a witness to what you believe about God and what you believe about Jesus. We claim Jesus is better than money.

[00:22:18]We claim that we don't put our faith in earthly things. Let your reaction to these moments, to these shaky economic indicators be a witness to your faith.

[00:22:33]You want to show people that Jesus is better than money?

[00:22:37]You want to show people that we as believers put our faith in the eternal and we don't put our faith in earthly things?

[00:22:45]Then continued inflation, higher buying pressure, more economic uncertainty, and things like market drawdowns or the potential of a coming recession should not lead us to fear.

[00:22:59]Should not lead us into the same kinds of conversations that you may hear from others at your workplaces or at your kids soccer game or wherever whatever context you find yourself in.

[00:23:14]When you are talking about money, when you are talking about the economy, when you are talking about the stock market or when you're just talking about how expensive things are at the grocery store, what is that saying to people about what you believe about Jesus? And again, I am never one to advocate for smile no matter what and act like everything's fine and you can never be frustrated and you can never have a negative emotion because Jesus cuz that's that's not even biblical. Go read half of the lament Psalms.

[00:23:42]There's there's a necessity for negative emotions when the time is appropriate and when it's for the purpose of knowing and trusting and glorifying God more deeply. But if there is frustration, if there is fear, still audibly speak into the fact that you are actively telling yourself what you know to be true, which is that Jesus is king and he is on his throne and he is and will continue to reign forever and our home is not here.

[00:24:11]We are sojourners here.

[00:24:14]Our home is elsewhere. This is not eternal and we are not trying to build up pseudo kingdoms here because we are waiting for and sewing into and working for the eternal kingdom that has been promised in Jesus.

[00:24:32]And if you're watching this and that sounds like complete and total nonsense, I would love to have a conversation with you about why A, I know that what I'm saying sounds crazy if you don't believe it, but B, there is so much more joy and peace and wealth to be found in the person and work and promise of Jesus than you're ever going to find in your investment accounts, than you're ever going to find in real estate or options trading or not investing at all, whatever it is that you think is going to satisfy you. It won't. And as believers, let's let our actions and our investing choices and our money choices and our spending choices be reflections of that which we know to be true. That Jesus is eternal. This is not our home and money will never satisfy.

[00:25:27]No matter what bond yields do, no matter whether a recession comes, no matter where whether a crazy market drawdown could come. It's happened before. It will happen again. But where is our hope?

[00:25:38]Our hope is in Jesus, in his eternal work and in the wealth and inheritance we have in him through God the Father.

[00:25:47]I'll see you guys next time.