- On Dec. 31, 2025, Treasury yields ended near 3.47% (2-year), 4.18% (10-year), and 4.84% (30-year).
- The yield curve is no longer deeply inverted, with the 10s–2s spread turning modestly positive as the curve steepens.
- The Fed cut the funds rate to 3.50%–3.75% in December, its third consecutive cut, with a divided committee signaling data dependence.
- Long-end yields remain elevated amid term premium, inflation expectations, and fiscal/global pressures, leaving the 2026 inflation-and-growth path uncertain.
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At the very end of 2025, Treasury yields encapsulate a market in transition. The data from December 31 show the 10-year Treasury at 4.18 %, a level only slightly below its recent highs, and the 30-year yield climbing to 4.84 %—near its 2025 peak. In contrast, the 2-year Treasury yield (3.47 %) tracks closely to the newly established Federal Funds rate of 3.50-3.75 %, evidencing a short-term yield environment tightly coupled with Fed policy expectations. The spread between the 10- and 2-year yields is modest but positive, signaling easing inversion and reinstated steepening in the curve.
The Fed’s December policy decision—its third straight quarter-point cut—lowers the Funds rate to 3.50-3.75 % and underscores a shift toward a more accommodative stance as inflation cools and labor market indicators soften. Notably, the Committee remains divided: two members preferred holding steady, while one dissented for a larger cut. This internal tension suggests that any further cuts will be data-dependent, and that the path forward is not assured.
Longer term yields (10- and 30-year) remain elevated—reflecting persistent inflation expectations, term premium, and fiscal pressures. The yield curve steepening—though slight—indicates that investors anticipate the Fed’s future cuts to improve short-term rates relative to long rates, and that inflation risks will continue influencing longer maturities.
Strategic implications for investors and policymakers center on balance: the Fed needs to navigate between anchoring inflation expectations and avoiding a too-sharp economic slowdown. For investors, high long yields offer attractive carry but also risk if inflation or growth surprise. Open questions involve whether inflation can return sustainably to the Fed’s 2 % target in 2026, how the labor market trends, and how fiscal deficits and global economic uncertainty will pressure U.S. sovereign debt pricing.
Supporting Notes
- 10-year Treasury note yield on December 31, 2025 ended at roughly 4.18 %.
- 2-year Treasury note yield on same date at approximately 3.47 %.
- 30-year Treasury note reached about 4.84 % end-of-day December 31, 2025.
- Federal Reserve’s target federal funds rate lowered to 3.50-3.75 % after December meeting, marking third cut in 2025.
- Fed policy statement indicates Committee is split: two preferring no change, one favoring larger cut.
- 10-year weekly average yield stood roughly at 4.16 % at end-December, compared with inflation about 2.74 % through November 2025.
- Spread between 10- and 2-year yields positive and widening—the curve steepening from inversion toward more normalized slope.