5% Treasuries Are Back. Should You Sell Your Stock to Buy Them?

"Safe" income just got its best pitch in two decades

For most of the past fifteen years, the answer to "why not sell and buy bonds?" was easy: bonds paid next to nothing. Not anymore. On Oct. 5 the 10-year Treasury yield passed 5.3%, the highest since 2002, after oil above $100 and sticky inflation pushed the Fed into its first hike in more than three years in September. On Oct. 28 the Fed held its target range at 3.75%–4.00%, but two of the twelve voters wanted another hike, and futures priced about an 85% chance of one at the Dec. 9 meeting.

Advisors are fielding the obvious question from clients with big, low-basis stock positions: why carry single-stock risk when a Treasury pays 5% guaranteed?

A 5% coupon on a smaller pile

The comparison people make is 5% on the bond against the stock's dividend. The comparison that matters is 5% on what's left after tax. Take a $5 million position with a $500,000 cost basis held by a California resident in the top bracket:

• The gain is $4.5 million. At a combined 37.1% (20% federal, 3.8% net investment income tax, 13.3% California), the tax bill is about $1.67 million.
• That leaves $3.33 million to invest. At 5%, it earns about $167,000 a year.
• At that pace it takes roughly ten years of interest just to earn back the tax, and the stock's upside is gone for good.

To be fair to the bond: a Treasury coupon is guaranteed and a stock is not. If your position is a big share of your net worth and you can't stomach a 40% drawdown, cutting it may be worth the tax. The point is to price that decision honestly, not to let a headline yield make it for you.

Your break-even on selling for bonds

Change the inputs to match your position. The tax rate defaults to California's top combined rate; set it to 23.8% if you live in a state with no income tax.

Higher rates change the borrow-against-it math too

The other classic answer, "don't sell, borrow against it," got more expensive this autumn. Securities-backed lines of credit usually float at a spread over short-term rates, so every Fed hike lifts the cost of carrying the loan. And the collateral is the same concentrated stock: a sharp fall can force a margin call at the worst possible moment.

A loan gives you cash, not income. When the loan rate rises toward or above what the stock earns you, you are paying the bank to keep your risk exactly where it was. We compared the two in securities-backed lending vs. Embark income.

Earn on the whole position, not the after-tax remainder

The reason the "keep" bar above is so much longer is that it earns on $5 million instead of $3.33 million. Contributing the shares to an Embark SPV under §721 is not a sale, so no tax is due at contribution and your basis carries over. Embark's team then runs income strategies on the position, targeting 10%+ a year.

Higher volatility, the same thing that makes investors nervous this autumn, tends to raise the premium those strategies can collect. It also cuts the other way: income varies, it can lag the stock in a sharp rally, and the stock can fall. Embark is offered to verified accredited investors under Rule 506(c). For a version in your own Schwab account without tax deferral, see Income+.

Three things to do before the next Dispatch

• Find your break-even. If you're tempted by bonds, run the calculator above and write down how many years of interest it takes to recover the tax.
• Check your loan's reset. If you have a securities-backed line, ask when the rate resets and what a Dec. 9 hike would add.
• Mark Dec. 9. The Fed's last decision of 2026 lands then. A hike would match what futures priced on Oct. 28; a hold would surprise them.

Next, No. 04 (Nov. 4): the Magnificent Seven stopped moving as one. What that dispersion means for single-stock holders and their recovery math.

Questions readers ask

Where is the 10-year Treasury yield now?

It closed at 5.00% on Oct. 26, 2026, according to the St. Louis Fed's FRED database, after passing 5.3% on Oct. 5, its highest level since 2002. Yields move daily, so check the Treasury's daily yield curve for the latest figure.

Did the Fed raise rates in 2026?

Yes. In September 2026 the Fed raised its target range by a quarter point to 3.75%–4.00%, its first hike in more than three years, and held there on Oct. 28 in a 10–2 vote. Its next decision is due on Dec. 9.

Is Treasury interest taxed?

Treasury interest is taxed as ordinary income at the federal level but is exempt from state and local income tax. This edition compares pre-tax income on both paths to keep the math simple.

Why not borrow against my stock instead of selling?

You can, but a securities-backed loan's rate usually floats with short-term rates, so Fed hikes raise its cost, and a falling stock can trigger a margin call. A loan gives you cash, not income.

How is Embark's income different from bond interest?

Bond interest is a contractual coupon. Embark's income comes from strategies run on your contributed stock and targets 10%+ a year. It is not guaranteed, varies with market conditions and is reported on a K-1. You keep exposure to the stock, including its downside.