10-Year Treasury Yield Long-Term Perspective: September 2025

Core Insights - The article examines the historical trends of the 10-year Treasury yield since 1962, highlighting its fluctuations and relationship with key economic indicators such as the Fed Funds Rate (FFR), inflation, and the S&P 500 [1][4]. Treasury Yield Trends - The 10-year Treasury yield peaked at 15.68% in October 1981 during the Volcker era and reached a historic low of 0.55% in August 2020 amid the pandemic [1][2]. - As of the end of September 2025, the weekly average of the 10-year yield was 4.16% [1][5]. Federal Reserve Actions - The FFR was raised to a historic high of 20.06% in January 1981 to combat stagflation, leading to a peak in the 10-year yield shortly after [2]. - Following the 2008 financial crisis and the 2020 pandemic, the FFR was reduced to near-zero levels, with a record low of approximately 0.04% in May 2020 [3]. - From May 2022 to August 2023, the Fed raised the FFR to its highest level in over 20 years, with a recent cut bringing it to a range of 4.00%-4.25% [4][5]. Inflation Dynamics - Inflation reached its highest levels since the stagflation crisis, prompting the Fed to raise rates, although some argue these efforts were delayed [4]. - As of the end of September, inflation was reported at 2.92%, indicating a persistent concern about inflation remaining above the Fed's 2% target [5]. Market Relationships - Generally, equities and treasuries move in opposite directions, but during inflationary periods, both can rise simultaneously due to the impact of higher interest rates on corporate profits and bond prices [6]. - Adjusting the S&P 500 and 10-year yields for inflation provides a clearer understanding of real returns, revealing the severe impact of stagflation on equity values [7]. Federal Reserve Policy Insights - The Fed's historical extremes in the FFR demonstrate its ability to implement significant policy shifts in response to economic conditions, focusing on taming inflation in the early 1980s and promoting growth in more recent years [9][10]. - Despite high interest rates, the S&P 500 has shown resilience, achieving record highs even during periods of elevated rates [11].