Treasury Yields Signal Stability as Curve Steepens

The trading week kicking off on September 22, 2025, sees US Treasury yields holding firm after recent Federal Reserve actions. The 10-year Treasury yield is at 4.14%, nudging up by 0.01 percentage points from its last close, while the 2-year yield has slipped to 3.58%. This creates a 0.56% gap between them, pointing to a gradually normalizing yield curve with an upward slope—a shift from earlier periods when shorter-term yields topped longer ones. The 30-year yield, around 4.75%, reinforces this positive tilt, driven by pressures like federal deficits and inflation concerns.

This week, markets are digesting the Fed’s recent 50-basis-point rate cut and eyeing potential further easing into 2026. Key reports, such as Tuesday’s flash purchasing managers’ indexes, Wednesday’s durable goods orders, and consumer confidence data, could spark market movements. Analysts anticipate the yield curve will keep steepening, with shorter-term yields possibly dipping as the Fed signals a dovish stance. Meanwhile, longer-term yields may hold steady or creep higher due to persistent inflation worries and government spending.

Projections suggest the 2-year yield could stay near 3.55% mid-week, potentially falling to 3.40% by year-end. The 10-year yield is expected to trade between 4.10% and 4.20%, likely staying put unless economic data softens significantly. Investors are leaning into strategies betting on a steeper curve, particularly in the 5-year to 30-year yield spread, which sits around 1.05%. Strong manufacturing or services data could fuel this steepening, lifting broader markets.

However, the looming Personal Consumption Expenditures (PCE) reading, a key inflation gauge for the Fed, could shake things up. A higher-than-expected PCE figure might push the 10-year yield toward 4.20%, briefly flattening the curve. On the other hand, dovish Fed comments could drive short-term yields lower, steepening the curve beyond 0.60% by week’s end. With no major Treasury auctions scheduled, any news on future bond supply will draw attention. For now, yields should trade in a tight range, with a tilt toward normalization as Fed optimism counters fiscal challenges, though the PCE data could shift the outlook swiftly.