The yield on the 10-year note concluded on September 26, 2025, at 4.20%. In comparison, the 2-year note finished at 3.63%, while the 30-year note ended at 4.77%.
The chart below illustrates the daily performance of various Treasury bonds, tracing back to the pre-recession equity market peaks, alongside the Federal Funds Rate (FFR) since 2007.
The following table presents the highs and lows of yields and the Federal Funds Rate (FFR) since 2007.
A Long-Term Look at the 10-Year Treasury Yield
Examining the long-term trajectory of the 10-year yield since 1965 reveals significant trends, particularly leading up to the 1973 oil embargo, which marked the onset of ‘stagflation’—a period characterized by economic stagnation coupled with inflation.
Inverted Yield Curve
An inverted yield curve occurs when longer-term Treasury yields fall below those of shorter-term counterparts. The next chart illustrates the latest 10-2 spread. Historically, this spread tends to turn negative before rising again prior to recessions, as shown in the four recessions depicted in the chart. Consequently, the 10-2 spread is widely regarded as a reliable leading indicator for recessions, with the lead time between a negative spread and the onset of a recession varying from 18 to 92 weeks.
One notable exception occurred in 1998, where the spread briefly turned negative without leading to a recession. In contrast, during the 2009 recession, the spread went negative multiple times before rebounding. Most recently, the spread remained negative from July 5, 2022, to August 26, 2024, with the last negative reading on September 5, 2024.
When considering the first negative spread date as the starting point, the average lead time to a recession is approximately 48 weeks, or about eleven months. If we use the last positive spread date before a recession, the average lead time shortens to 18.5 weeks, or roughly 4.25 months.
For a different perspective, the 10-3mo spread below utilizes an even shorter-term maturity. The lead time to recessions based on this spread (after it turns negative) ranges from 34 to 69 weeks. Similar to the 10-2 spread, the 1998 false positive is evident, along with multiple instances of the spread turning negative before rising again ahead of the 2009 recession. Recently, the spread was negative from October 25, 2022, to December 12, 2024, and has fluctuated between positive and negative since February 26.
Using the first negative spread date as the starting point, the average lead time to a recession is about 48 weeks, or eleven months. Conversely, if we consider the last positive spread date after the spread had turned negative, the average lead time drops to 13 weeks, or approximately three months.
The 30-Year Fixed Rate Mortgage
The Federal Funds Rate significantly influences borrowing costs for banks. When the Fed raises this rate, banks typically increase their lending rates, which can affect mortgage rates among other financial products. Generally, a rising FFR leads to higher mortgage rates; however, this trend was not observed recently when the Fed initiated a rate-cutting cycle in September, resulting in a decline in mortgage rates. Currently, mortgage rates have been decreasing even as the Fed maintains steady rates, with the latest Freddie Mac Weekly Primary Mortgage Market Survey reporting the 30-year fixed rate at 6.30%.
Next, we examine the 10-year yield in relation to the S&P 500, noting the significant impact of Federal Reserve interventions on market behavior.
For a comprehensive long-term view of weekly Treasury yields, particularly focusing on the 10-year yield, check out our latest Treasury Yields in Perspective update.
ETFs associated with Treasuries include: Vanguard 0-3 Month Treasury Bill ETF (VBIL), Vanguard Intermediate-Term Treasury ETF (VGIT), and Vanguard Long-Term Treasury ETF (VGLT).
Originally published on Advisor Perspectives
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