On 23 September the ten-year Treasury closed above 5% for the first time since 2007. Of the twenty-six companies we examined that month, four yielded more than it — and three of the four had an obvious reason.
A week earlier the Federal Reserve had raised rates for the first time in three years. By the twenty-fourth the ten-year stood at 5.12%.
That number is not a view, a forecast or a model output. It is a return you can lock in tomorrow with no credit risk. Which makes it the one figure in finance that every other asset has to answer to — and it moved.
Earnings yield against 5.12%
Invert the multiple and the question becomes concrete
| Multiple, at our report | Earnings yield | Against 5.12% | |
|---|---|---|---|
| Alphabet | ~34× trailing operating earnings | 2.94% | −2.18 pts |
| Microsoft | 28.8× fiscal-2026 earnings | 3.47% | −1.65 pts |
| Coca-Cola | 26.6× 2026 consensus | 3.76% | −1.36 pts |
| Alphabet (forward) | 22.7× 2027 consensus | 4.41% | −0.71 pts |
| Enbridge | 11.3× 2026 distributable cash flow | 8.85% | +3.73 pts |
| Verizon | 9.3× 2026 adjusted EPS | 10.75% | +5.63 pts |
| Adobe | ~9× next year's earnings | 11.11% | +5.99 pts |
| Kaspi.kz | 8× earnings | 12.50% | +7.38 pts |
The top four rows are companies whose current earnings buy you less income than a government bond. That is not an accusation — it is what paying for growth means, stated arithmetically. You are accepting less now for more later, and the rate rise has raised the price of that trade.
The bottom four are companies whose current earnings buy you two to two-and-a-half times the bond. Which raises the obvious question: why would anyone accept the top half? And the honest answer is that the top-half businesses are likely to be much larger in ten years and the bottom-half ones may not be.
A 5% hurdle does not tell you what to buy. It tells you what you are claiming when you buy — and it has raised the price of every claim about the distant future.
Why it hits some assets much harder
A share is worth the cash it will produce, discounted back to today. Raise the discount rate and every future pound is worth less now — but not equally. The further out the cash, the more damage.
Which produces a specific and predictable ranking of who suffers:
- Long-duration growth suffers most. A company whose cash flows arrive mostly after year ten has almost all of its value in the part of the calculation the discount rate punishes hardest.
- Yield substitutes get repriced directly. REITs, utilities and infrastructure are bought for income, so they compete with bonds head-on. When the bond yield rises, the share price has to fall for the yield to stay competitive — regardless of how the business is doing.
- Leverage becomes visible. Debt gets refinanced at the new rate, not the old one. A balance sheet that was comfortable at 3% is a different balance sheet at 5%, and nothing about the business changed.
- Short-duration cash generators suffer least. A business earning most of its value in the next five years barely notices the discount rate. That is the quiet argument for the bottom half of the table above.
The hurdle moved 27 basis points in thirteen days
Our Realty Income report is dated 10 September 2026, with the shares at $59.57 yielding 5.5%, against a ten-year Treasury the report puts at about 4.85%. A premium of 65 basis points over the risk-free alternative, for taking on property, tenants and leverage.
Thirteen days later the ten-year was 5.12%. The premium was 38 basis points.
The company did nothing. The shares did nothing. The compensation for owning a REIT instead of a Treasury fell by 27 basis points because of something that happened in the bond market — and any investor looking only at the dividend yield saw no change at all.
That is the whole point of watching the hurdle. A 5.5% yield is not a fact about an investment. It is one half of a comparison, and the other half moves on its own.
Four out of twenty-six clear the bar
| Yield | And the reason it is that high | |
|---|---|---|
| Kaspi.kz | ~9% | Kazakhstan, the tenge, and a state that built its own competing QR code. The discount is the country, not the company. |
| Verizon | 6.1% | $200bn of debt against a market value around $195bn — the lenders own more of it than the shareholders. Cover is a genuine 1.8×. |
| Enbridge | 5.8% | Debt at 5.1× earnings, above its own target, with C$3bn of new shares issued in the month to keep funding the build. |
| Realty Income | 5.5% | The clean one — and now only 38 basis points above the bond. |
Twenty-two of twenty-six pay you less than a government bond. That is the sentence to sit with if you own shares for income, because it means the case for almost every one of them now rests entirely on growth of the payment rather than the size of it.
Which is a legitimate case — a 2.4% dividend growing 6% a year overtakes a fixed 5.12% eventually, and then keeps going. But it is a different case from the one most income investors think they are making, and it requires the growth to actually happen.
It is not a sell signal. A hurdle rate changes what you should pay, not what you should own — and selling a compounding business to buy a fixed 5.12% swaps a growing stream for a static one at the precise moment the growing stream got cheaper.
It is also not permanent. The ten-year was above 5% for years before 2007 and below 2% for years after it. Anchoring a lifetime's valuation discipline to whatever the rate is this month is its own mistake.
Three things to do this week
One divided by the price-to-earnings ratio. Write the number next to 5.12%. You are not looking for a verdict — you are looking at how much of your return you have agreed to wait for.
Dividend yield minus the ten-year. Then ask whether that gap compensates you for the tenants, the leverage, the currency or the regulator you are taking on. Under about a point, it usually does not.
The maturity schedule is in the annual report. Debt maturing in the next two or three years gets repriced at today's rate. A company with cheap fixed debt running to 2032 is in a completely different position from one refinancing next year, and no ratio shows you which is which.
One at 3.5% earnings yield, one at 5.5% dividend yield, and one where the lenders own more than the shareholders.
Each valued against the rate that applied on the day it was written.
Frequently asked
What is the risk-free rate and why does it matter?
It is the return available with no credit risk — conventionally the ten-year government bond — and it matters because it is the hurdle every other investment has to clear. On 23 September 2026 the ten-year Treasury closed above 5% for the first time since 2007, at 5.12%. That is not a forecast or a view; it is a number you can lock in, which is exactly what makes it a hurdle.
How does a higher risk-free rate lower share prices?
Through the discount rate. A share is worth the cash it will produce, discounted back — and raising the rate you discount at lowers the present value of every future pound, with the most distant ones affected most. That is why a rate rise hurts long-duration assets — high-growth companies, REITs, infrastructure — more than it hurts a business earning most of its cash in the next few years.
Is a 5% Treasury better than dividend stocks?
For income alone, it is better than most of them right now. Of the twenty-six companies we published in September 2026, only four yielded more than 5.12% — and three of those four carried a specific reason: a frontier currency, debt exceeding the market value of the equity, or leverage above the company's own target. The Treasury has no growth; but it also has no argument to lose.
What is the earnings yield and how do I compare it to bonds?
Invert the price-to-earnings ratio. Microsoft at 28.8 times fiscal-2026 earnings is an earnings yield of about 3.5%, which is roughly 165 basis points below a 5.12% Treasury — you are accepting less current income for the growth. Adobe at about nine times is an earnings yield near 11%, more than double the Treasury. That comparison is the fastest way to see what a market is actually asking you to believe.