Treasury Yields Snapshot: June 6, 2025

As of June 6, 2025, the 10-year Treasury yield stood at 4.51%, with the 2-year at 4.04% and the 30-year at 4.97%; the article highlights the predictive power of inverted yield curves (specifically the 10-2 and 10-3 month spreads) as recession indicators, noting that while these spreads have recently fluctuated, historical data suggests a potential recession within approximately 3-11 months following the initial or final negative spread date. Despite the Fed holding rates steady, mortgage rates have recently declined, with the 30-year fixed rate at 6.85% according to Freddie Mac.

Analysis

As of June 6, 2025, U.S. Treasury yields showed the 10-year note at 4.51%, the 2-year note at 4.04%, and the 30-year note at 4.97%. This places the 10-2 year Treasury spread at a positive 0.47%. This spread is a closely watched recession indicator, which was continuously negative from July 5, 2022, to August 26, 2024, with its last negative reading on September 5, 2024. Historically, a re-steepening of the yield curve (spread turning positive) after a prolonged inversion often precedes economic recessions, with lead times from the initial inversion averaging approximately 48 weeks (around 11 months). Similarly, the 10-year/3-month Treasury spread, another recession predictor, was inverted from October 25, 2022, to December 12, 2024, and has exhibited volatility by swinging between positive and negative territory since February 26, 2025; its average lead time to recession after an initial inversion is also around 48 weeks, while the period after it turns positive following an inversion can be as short as 13 weeks (approximately 3 months) to a recession. In the mortgage market, the 30-year fixed rate is currently 6.85% according to Freddie Mac, reflecting a recent decline despite the Federal Reserve holding benchmark rates steady, a deviation from the period when the Fed began a rate-cutting cycle in September 2024 and mortgage rates initially moved counter-directionally.

Key Decisions for Investors

• Investors should closely monitor leading economic indicators for confirmation of a potential recession, given that the 10-2 and 10-3 month Treasury yield spreads have completed significant inversion periods in late 2024, a historically reliable pre-recessionary signal.
• The recent re-steepening of the 10-2 spread and the current volatility in the 10-3 month spread warrant a cautious stance, as these patterns align with historical precedents where recessions could follow within a timeframe of roughly 3 to 11 months, depending on the specific spread and calculation methodology.
• Consider the implications of the recent decline in 30-year fixed mortgage rates to 6.85% amidst a steady Federal Funds Rate, as this could signal evolving credit market dynamics and lender expectations, impacting the housing sector and related investments.