The yield on the 10-year note finished July 10, 2026 at 4.56% while the 2-year note ended at 4.21%.
Policy and market dynamics have been key drivers of the yield environment. The Federal Funds Rate influences the cost of borrowing for banks, and when the Fed raises this rate, banks often raise lending rates, including mortgage rates. In September 2024 the Fed began a rate-cutting cycle, and mortgage rates moved in the opposite direction. The latest Freddie Mac Weekly Primary Mortgage Market Survey put the 30-year fixed rate at 6.49%.
The inverted yield curve, where longer-term Treasuries yield less than shorter-term ones, has been a notable feature of recent cycles. The 10-2 spread is widely considered a leading indicator for recessions. The spread has been negative from July 5, 2022, to August 26, 2024, with the last negative reading on September 5, 2024.
If we consider the first negative spread date as the starting point, the average lead time to a recession is 48 weeks, or about eleven months. If we instead use the last positive spread date before a recession, the average lead time is 18.5 weeks, or about 4.25 months.
A long-term view of the 10-year yield starting in 1965 is shown in related materials, illustrating the era of 'stagflation' and other cycles.
For a long-term weekly view of Treasury yields focusing on the 10-year, there is a Treasury Yields in Perspective update. A table shows the highs and lows of yields and the Federal Funds Rate since 2007.
The relationship between the Federal Funds Rate and mortgage rates remains a key channel for borrowers. While the Fed began cutting rates in September 2024, mortgage rates moved in the opposite direction, with declines in some episodes. The 30-year fixed rate was reported at 6.49% in the latest survey.
The Fed policy has been a major influence on market behavior, including movements in the 10-year Treasury yield versus equities such as the S&P 500.
Analysts note that Fed policy has been a major influence on market behavior, and that the yield curve and associated indicators continue to signal evolving economic conditions.
