Discipline Funds Research Tools
Bond Market Escape VelocityBeta
How far out the Treasury curve can you go before a jump in rates costs more than a year of income?
Income versus price loss across the curve
Where the yield line sits above the loss line, one year of income covers the rate shock.
Current Treasury curve
Cushion is one year of yield minus the price loss, in percentage points.
| Maturity | Yield | Loss | Cushion |
|---|---|---|---|
| Loading… | |||
Escapes the shockTrapped
Where escape velocity has sat, 1980 to today
Each bar runs a 100 bp shock on that year's average Treasury curve. Bars above the shaded band mean the whole 1Y to 10Y curve escaped. Bars below it mean not even the 1Y did. Tap or hover any bar for the details.
What this measures
Escape velocity is the point on the Treasury curve where one year of interest income covers the price hit from a jump in rates. Anything shorter earns back the loss within the year. Anything longer takes a hit the income can't cover, at least not in year one.
How to use it
100 bp is the standard test. Flip to 200 bp and you need a lot more income to break even, so the escape point moves in sharply. At 50 bp it pushes way out.
The rule of thumb
Escape velocity tends to land near the maturity where the yield in percent equals the duration in years. The tool prices the actual loss instead of leaning on that shortcut.
Methodology and data sources
Price loss comes from fully repricing a par bond with semiannual coupons at the shocked yield, not from multiplying duration by the shock. That matters at bigger moves. A 200 bp shock on a 10Y at about 4.3% costs roughly 14.7% with full repricing versus 16.1% using the linear duration estimate, so the shortcut overstates the loss by close to a tenth. The yield equals duration rule is still a decent approximation, and full repricing only pushes the crossing point out by about 0.1 to 0.4 years.
The live curve uses the 1Y, 2Y, 3Y, 5Y, 7Y and 10Y constant maturity Treasury yields, connected with straight lines between quoted points. The headline reading is the first point, moving out from the short end, where the cushion turns negative.
Annual bars use each year's average constant maturity yields at the same six maturities (FRED series RIFLGFCY01NA, RIFLGFCY02NA, RIFLGFCY03NA, RIFLGFCY05NA, RIFLGFCY07NA and RIFLGFCY10NA, from the Federal Reserve H.15 release). The 2026 bar is a partial year, the January through August average of FRED series GS1, GS2, GS3, GS5, GS7 and GS10. The Now bar runs the same 100 bp calculation on the live curve so it sits on the same basis as the history.
When escape velocity falls outside the quoted range, the curve is held flat at the nearest point, the 10Y yield for readings past 10 years and the 1Y yield for readings under 1 year, so those bars are estimates. Bars are capped at 15 years on the chart and the tooltip shows the full figure.
The same threshold roughly applies to TIPS of similar maturity. Price volatility is comparable between nominal Treasuries and TIPS, but TIPS lock in a real return as extra compensation for that volatility, which makes them attractive for long horizon investors who can live with the mark to market noise.
Put this to work
Match your bonds to when you actually need the money
Escape velocity tells you how much rate risk a bond can absorb in a year. We build that same logic into every Defined Duration® plan. Near-term spending sits in bonds that can ride out a rate shock, and money you won't touch for decades gets the time it needs to grow.
For educational purposes only. This tool is not investment advice or a recommendation to buy or sell any security. Discipline Funds.