10-Year U.S. Treasury Yield: 24-Month History and 90-Day Projections

Historical Yield Trends (Past 24 Months): Over the last two years, the 10-year U.S. Treasury yield climbed from the mid-3% range in mid-2023 to multi-year highs around 4.8% by late 2023. This surge reflected persistent inflation and aggressive Fed rate hikes, which drove up real yields and inflation expectations. For example, 10-year breakeven inflation rose from ~2.0% in September 2024 to ~2.4% by January 2025 amid tariff and geopolitical anxieties, signaling higher expected inflation. After peaking near 4.9% in October 2023, yields briefly eased (hitting ~3.6% in Sep 2024) as recession fears and bank failures sparked safe-haven demand. However, renewed economic strength and inflation volatility pushed yields back into the mid-4% range by spring 2025. As of May 2025 the 10-year yields ~4.5%, a level reflecting both Fed policy expectations and a sizeable risk premium for uncertainty.

Macroeconomic Factors Influencing Yields: The elevated yield environment in 2024–2025 has been driven by a confluence of factors. Stubborn inflation (with U.S. core CPI projected near ~5% in 2025) underpins a “higher for longer” stance by the Fed. Indeed, tariff-related price pressures have limited the Fed’s scope to cut rates, keeping long-term yields elevated. Market-derived expectations for the Fed’s terminal rate in coming years climbed throughout 2024, adding upward pressure on the 10-year yield. At the same time, geopolitical tensions and trade policy uncertainty have increased the term premium investors demand. Tariff fears in particular have contributed to persistently higher inflation expectations – e.g. breakeven inflation jumped to 2.40% by Jan 2025 largely due to fears that tariffs would fuel higher prices. This uncertainty premium has helped keep the 10-year yield “volatile in the low-to-mid 4% range” in recent months. In short, a mix of lingering inflation risk, Fed tightening (the 10-year real TIPS yield has been ~2% vs a ~1.3% long-run average), and global risk factors have all sustained higher U.S. Treasury yields.

Scenario 1 – Uncertainty Continues: In this scenario, current market uncertainties persist or intensify over the next 90 days. Ongoing geopolitical tensions, volatile energy prices, and unresolved tariff disputes would keep investors cautious. Inflation volatility would remain a concern – for example, tariff-related price impacts could keep inflation expectations elevated (near the ~2.4% breakeven seen in early 2025). The Fed, constrained by core inflation around 5%, may delay or minimize rate cuts, maintaining upward pressure on long yields. We therefore project the 10-year yield to remain elevated and range-bound, with a bias toward slight increases. Under continued uncertainty, the 10-year could oscillate within roughly 4.4–4.8%, reflecting a persistent term premium. Minor flight-to-quality rallies might occur on risk-off news, but any dips in yield likely reverse as inflation and supply fears resurface. By late summer, this scenario sees the 10-year yield edging up into the high-4% range (around ~4.6–4.7%). Expert forecasts align with this outlook – CBRE’s base case (assuming tariff impacts persist) expects 10-year yields to stay “volatile in the low-to-mid 4% range” in coming months. The red line in the chart below illustrates this scenario, showing a modest upward drift with intermittent volatility.

Scenario 2 – Tariff Resolution & Increased Certainty: This scenario assumes a breakthrough in trade/tariff negotiations and easing of other uncertainties, leading to a more benign market backdrop. A resolution of tariff issues would directly reduce a key inflationary fear: indeed, absent tariff-driven pressures, inflation expectations could pull back toward ~2% (undoing the recent 0.3–0.4% jump in breakevens). Lower inflation volatility and improved clarity on policy would likely shrink the term premium embedded in long-term yields. The Fed might also gain confidence to proceed with rate cuts (beyond the two 2025 cuts currently anticipated) if inflation is better anchored. As a result, we project the 10-year yield to drift downward under this scenario. Over the next 90 days, yields could gradually fall into the low-4% or even high-3% range. For example, by late summer the 10-year might approach ~4.2% or below, as shown by the green line in the chart. This moderation reflects reduced risk premiums and inflation fears – essentially unwinding some of the “uncertainty yield” built into current rates. It’s worth noting that stronger economic activity from improved trade relations could put some upward pressure on yields (via higher growth expectations), but in the near term this effect is offset by the decline in risk premiums. Overall, scenario 2 envisions a calmer market with the 10-year yield settling 10–30 basis points lower than recent levels, consistent with increased market certainty.

Chart: 10-Year Treasury yield history vs. projections. The solid black line shows the actual 10-year yield over the past 24 months, which rose from ~3.5% in mid-2023 to ~4.8% peak in late 2023, then oscillated in the 3.6–4.5% range through mid-2025. The blue dashed line is the 5.5% MBS coupon yield, which consistently runs higher than Treasuries. The vertical gray line marks May 2025 (current), after which the red dash-dot line depicts Scenario 1 (continued uncertainty) and the green dotted line depicts Scenario 2 (tariff resolution) projections for the next 90 days. These scenario lines show the 10-year yield staying elevated or rising slightly in Scenario 1, versus declining under Scenario 2, respectively. Historical data source: U.S. Federal Reserve Board (H.15 rates).

5.5% MBS Coupon Yield Comparison: We include the 5.5% mortgage-backed security (MBS) coupon yield as a reference, since mortgage yields often move with Treasuries but with an additional spread. Over the past two years, the MBS 5.5% coupon yield (blue dashed line above) has hovered roughly 1–1.5 percentage points above the 10-year Treasury yield. For instance, as of March 2025 the current-coupon agency MBS yield was about 5.51% – significantly higher than the ~4.23% 10-year Treasury at that time. This spread (~130 bps) reflects extra compensation for prepayment and liquidity risks in MBS, and it tends to widen when market volatility is high. In 2022–2023, amid Fed tightening and recession fears, agency MBS spreads blew out to multi-year highs (reaching ~180 bps at the peak) as investors demanded more yield over Treasuries. Recently these spreads have narrowed somewhat – by early 2025 the MBS–Treasury spread was around 1.26% – but remains above long-term averages (historically <100 bps in calmer periods).

For our projection, we assume in Scenario 1 that MBS yields will track the rising 10-year yield and could even widen slightly if uncertainty persists. Elevated rate volatility typically keeps MBS spreads near current levels or higher, so if the 10-year yield rises toward ~4.7%, the 5.5% MBS yield may increase to ~6.0% (maintaining a spread in the 130–150 bp range). By contrast, in Scenario 2 a return of market stability would likely narrow the MBS spread as investor demand for mortgage bonds improves. Even if the 10-year yield falls to ~4.2%, the MBS yield might only dip to roughly ~5.2% (a tighter spread closer to 100 bps). In other words, mortgage yields would decline more slowly than Treasuries in a calming scenario, but the overall direction would still be downward. The chart’s blue line (historical) illustrates how MBS yields have moved in parallel with 10-year rates – rising sharply in late 2022 and again in 2023 – but at a higher level. Going forward, those two lines would likely remain roughly parallel under Scenario 1, whereas Scenario 2 should bring them closer together as the gap (spread) compresses.

Modeling Approach & Assumptions: Our 90-day projections are based on a blend of macroeconomic inputs and expert forecasts rather than a purely statistical model. We incorporated inflation outlooks (e.g. the impact of tariff resolution on breakeven inflation), central bank policy signals, and historical spread relationships. In Scenario 1, we assumed the Fed remains cautious (no rapid easing) and the term premium stays elevated due to ongoing risk events – consistent with forecasts that 10-year yields will stay in the mid-4% range with volatility. In Scenario 2, we assumed a positive shock of reduced trade tensions: this lowers expected inflation (by roughly 0.3–0.4%, reversing the tariff fear effect) and eases recession fears, leading us to shave roughly 30–40 bps off the 10-year yield over the quarter. We cross-checked these assumptions with analyst views: for example, T. Rowe Price noted that tariff/immigration policy fears have materially raised inflation expectations in late 2024, implying their removal could inversely push yields down. We also followed the Fed’s guidance of only gradual rate cuts (as noted by CBRE) – thus, neither scenario envisions a dramatic Fed-driven plunge in yields in just 3 months. Rather, the projections reflect incremental market adjustments to the prevailing climate of uncertainty vs. certainty.

Finally, for the MBS yield comparison, we relied on current market data and typical spread behavior. The historical MBS line in the chart uses Bloomberg’s MBS index yields and current-coupon yields (5.51% as of Mar 2025). We assumed an average MBS-Treasury spread of ~1.3% under status quo uncertainty, and a tightening toward ~1.0% if conditions improve. This aligns with industry observations that agency MBS spreads remain wider than normal in volatile environments, but would compress if rate volatility abates. Our approach is illustrative – the red and green projection lines are drawn as smooth trajectories for clarity – but grounded in the qualitative direction given by experts and macro indicators. In summary, Scenario 1 assumes “more of the same” (inflation and risk premia keep yields high), while Scenario 2 assumes a confidence boost (inflation drifts down and yields follow). We have clearly marked the historical vs. projected segments on the graph, and provided sources for all data and assumptions to ensure transparency in the modeling.

Sources and Data: Historical yield data is from the Federal Reserve (daily H.15 release). MBS yield data is based on Bloomberg Barclays MBS Index yields and current-coupon yields as reported by investment managers. Key assumptions about inflation and Fed policy draw from T. Rowe Price and CBRE Investment Management forecasts. The relationship between MBS spreads and volatility is supported by DoubleLine’s market commentary (current coupon spread ~1.26% in early 2025 amid high volatility) and historical averages. These inputs collectively inform the projection scenarios depicted above, providing a data-backed outlook for the next 90 days under contrasting uncertainty conditions.