Here’s our Club Mailbag email [email protected] — so you send your questions directly to Jim Cramer and his team of analysts. We can’t offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries. Why would anyone invest in the 10-year Treasury when you can get higher returns holding cash right now, much less other types of investments? Why does the 10-year keep going up and thus increasing mortgage rates, affecting many stocks while the Fed is cutting rates? Appreciate your help! — SB Addressing the first part of the question, investing in the 10-year Treasury , with a current yield of about 4.75%, is all about locking in the rate of return. Remember, the interest rate (or yield) on bonds — corporate debt or U.S. government Treasurys — is always fluctuating. Holding cash in a money market account, such as Fidelity’s SPAXX, does indeed yield a little over 4% at the moment and with a little searching you can find a certificate of deposit (CD) that pays out closer 5%. However, it’s important to consider the time frames. (Those rates might go up considering the spike in Treasury yields Friday on strong jobs data .) The Fidelity Government Money Market Fund (SPAXX), like most money market accounts given their high levels of liquidity, is heavily concentrated in short-term debt. The yield the fund can offer will depend entirely on the rates it can lock in as these existing securities, mature and roll off the books, requiring new securities with updated rates to be purchased. If rates go up in the near term, the fund’s overall interest rate will increase to the benefit of those holding cash in the security. However, the reverse is also true as the fund’s yield will decline as old securities are rolled off should the ones replacing them have lower yields. In other words, the yield isn’t locked in for any meaningful period of time as over 50% of the SPAXX portfolio is refreshed every week. The prices on debt move inversely to their yields. Purchasing a 10-year Treasury, however, allows the buyer to lock in a yield until maturity. The yield may be lower at times than what is available on cash, but it is also set for a much longer period of time. If you are someone who wants to lock in a level of income, even if not the highest possible in the very near term, that’s going to be attractive. (The CNBC Investing Club only owns stocks and cash.) Imagine, for example, that you had $1 million to invest with the goal of attaining passive income. You have the option of investing in 12-month CD at 5% or a 10-year Treasury at 4.75%. Purchasing the CD will guarantee you income in year one of $50,000 (pre-tax), however, what you make in year two and beyond will rely entirely on the rate you can lock in after year one when the CD matures, and the funds are released. Going with the 10-year Treasury will guarantee you income of $46,000 (pre-tax) for the next 10 year. Depending on your needs and investment horizon, you may be inclined to give up some income in year one for the guarantees in years two through 10, especially if you think rates are going lower longer-term. That brings us to the second part of the question, regarding why the 10-year Treasury yield remains high when the Federal Reserve is easing short-term interest rates. Starting with a jumbo 50 basis point September cut, the Fed reduced rates three times last year for a total of 100 basis points or 1 percentage point. When talking about Fed rates, we’re talking about the overnight bank lending rate. Central bankers projected two more cuts in 2025. While the Fed can try to talk down the longer end of the yield curve , it can only directly impact the overnight rate. It can attempt to influence the longer end of the curve by buying and selling securities in the open market — and as a buyer with essentially unlimited firepower, it certainly has influence. However, the central bank can’t directly impact the rate. As a result, rates on the longer end, where the 10-year sits, tend to reflect market expectations for future inflation. Those expectations then flow through to all other forms of debt. So, mortgage rates, for example, key off longer-term government bonds. However, they must then price in the added risk of lending to private borrowers — considering the inherent risks of buying residential real estate. That’s why, despite the Fed lowering rates on the short end, we have not seen the progress we would like on the long end. The Fed may provide its view, but it’s the view of the market in aggregate that determines longer-term interest rates. It’s those longer-term rates that are getting plugged into calculations that ultimately determine everything from mortgage rates to the fair value of equities. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. 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