Treasury Yields Snapshot: July 11, 2025

Treasury yields on July 11, 2025, closed with the 10-year at 4.43%, 2-year at 3.90%, and 30-year at 4.96%. The article highlights the 10-2 and 10-3mo yield curve spreads as key recession indicators, noting the 10-2 spread was continuously negative from July 2022 to August 2024, with average recession lead times of 11 months from the first negative or 4.25 months from the last positive before a recession. Similarly, the 10-3mo spread was negative from October 2022 to December 2024, with average lead times of 11 months or 3 months respectively, underscoring persistent recession signals. Concurrently, the 30-year fixed mortgage rate recently stood at 6.72%, notably declining despite the Federal Reserve holding rates steady, indicating a complex and sometimes divergent relationship between Fed policy and lending rates.

Analysis

The U.S. Treasury yield curve, as of July 11, 2025, is upward sloping with the 2-year note at 3.90%, the 10-year at 4.43%, and the 30-year at 4.96%. However, this follows a significant and prolonged period of inversion, a historically reliable recession indicator. The 10-2 year spread was continuously negative from July 2022 to August 2024, and the 10-3 month spread was inverted from October 2022 to December 2024. Historically, the average lead time from the initial inversion to a recession is approximately 11 months, and roughly 3 to 4.25 months after the spread turns positive again. This suggests the economy remains in a window of heightened recession risk, despite the curve's current normalization. Adding to market complexity, the 30-year fixed mortgage rate, at 6.72%, has recently declined while the Federal Reserve has held its policy rate steady, indicating that bond market dynamics and economic outlook are currently exerting more influence on lending rates than direct Fed policy shifts.

Key Decisions for Investors

• Given the prolonged yield curve inversion that has only recently corrected, investors should review portfolio exposure to cyclical sectors and consider a more defensive positioning in anticipation of a potential economic slowdown.
• With the current upward-sloping curve, consider locking in higher long-term yields through instruments like intermediate or long-term Treasury ETFs (e.g., VGIT, VGLT), as rates may fall if the Fed eases policy in response to a future recession.
• Closely monitor the 10-2 and 10-3 month yield spreads for any signs of re-inversion, as recent volatility in the 10-3mo spread suggests continued uncertainty and could provide a more immediate signal of changing economic conditions.