US bond 10-year yields suffer biggest weekly drop in over year. Why is treasury note down?

US bond market benchmark 10-year Treasury yields on track for their biggest weekly decline in more than a year, while investors assessed the latest economic data and bet that the Federal Reserve's next rate hike will not come until December. After a tumultuous week when the 10-year yield swung between a high of 5.329 per cent on Wednesday and a low of 5.037 per cent on Thursday, the benchmark note moved between advances and declines on Friday.

But even with the day's moves, 10-year yields were still headed for their biggest weekly drop since the week ended August 1, 2025.

The yield on the benchmark US 10-year Treasury note was unchanged at 5.087 per cent after earlier rising to 5.1334 per cent. The yield on the 30-year bond rose 0.5 basis point to 5.433 per cent after trading earlier at 5.464 per cent. The 2-year US Treasury yield, which typically moves in step with interest rate expectations for the Fed, fell 3.2 basis points to 4.719 per cent. Earlier it had risen to 4.783 per cent.


US Bond Market Predictions

“So, there is some element really across this week of overcrowded trades and short squeezes unwinding to some extent. I don’t see anything that’s changing the fundamental trend direction in the case of yields," said Matt Weller, global head of market research at StoneX in Michigan.

A closely watched part of the US Treasury yield curve measuring the gap between yields on 2- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 36.6 basis points.

The 10-year TIPS breakeven rate was last at 2.347 per cent, indicating the market sees inflation averaging about 2.3 per cent a year for the next decade.

"There's a ton of competing undercurrents beneath the Treasury market that are pushing and pulling the long end of the yield curve in different directions and quite a bit of volatility intraday," said Michael Reynolds, vice president of investment strategy at Glenmede in Philadelphia.

He pointed to a "flight to safety" due to volatility in equity markets, driven by concerns about heavily indebted AI companies, and an increasing tendency by investors to look for opportunities in bonds since Treasury yields hit their highest levels in decades earlier this month.

US Fed Interest Rate

While investors have increasingly been betting that the Fed would pause its rate hikes, some were disappointed by the lack of guidance from Fed Chairman Kevin Warsh.

Warsh said he does not "prejudge" interest-rate decisions. But speaking at the 2026 IMF-World Bank annual meetings in Bangkok, he said that with September's rate hike the Fed "made very clear that we would deliver price stability, and we removed a dose of accommodation."

Still, on Friday traders solidified their bets that the Federal Reserve would hold rates steady at its October 27-28 meeting, pricing in a roughly 83 per cent chance of a pause while they put the probability of a December hike at about 88 per cent, according to LSEG data.