Treasury Yields Snapshot: December 31, 2025

Core Insights - The yield on the 10-year Treasury note finished at 4.18% on December 31, 2025, while the 2-year note ended at 3.47% and the 30-year note at 4.84% [1] - The inverted yield curve, where longer-term Treasury yields are lower than shorter-term yields, is a reliable leading indicator for recessions, with the 10-2 spread turning negative before recessions [2][3] - The average lead time to a recession based on the first negative spread date is approximately 48 weeks, while using the last positive spread date yields an average lead time of 18.5 weeks [4][6] Treasury Yield Analysis - The 10-3 month spread also indicates lead times to recessions ranging from 34 to 69 weeks, with similar patterns observed as in the 10-2 spread [5] - The most recent negative spread for the 10-2 occurred from July 5, 2022, to August 26, 2024, while the 10-3 month spread was negative from October 25, 2022, to December 12, 2024 [3][5] Mortgage Rate Trends - The Federal Funds Rate (FFR) influences borrowing costs, and typically, an increase in the FFR leads to higher mortgage rates; however, recent trends show mortgage rates declining despite the Fed's rate-cutting cycle starting in September 2024 [7] - The latest Freddie Mac Weekly Primary Mortgage Market Survey reported the 30-year fixed mortgage rate at 6.15%, the lowest since October 2024 [7] Market Behavior and Federal Reserve Influence - Federal Reserve policy has significantly influenced market behavior, particularly in relation to Treasury yields and mortgage rates [8]