Treasury Yields Snapshot: September 8, 2023

Note: We've updated this commentary with data through the September 8th market close.

The yield on the 10-year note ended September 8, 2023 at 4.26%, the 2-year note ended at 4.90%, and the 30-year at 4.33%.

Here is a table showing the yields' highs and lows and the FFR since 2007.

Treasury Yields and Fed Funds Rate Since 2007

The charts below show the daily performance of several Treasury bonds since the pre-recession days of equity market peaks in 2007.

Treasury Yields Since 2007

The next chart is an overlay of all 6 charts above along with the Fed funds rate (FFR) since 2007.

Treasury Yields and Fed Funds Rate Since 2007

A Long-Term Look at the 10-Year Treasury Yield

Here is a long look of the 10-year yield with a start date of 1965, well before the 1973 oil embargo that triggered the era of "stagflation" (economic stagnation with inflation).

10-year Yield Log Scale

Yield Curve

Here's the latest 10-2 spread. Typically, the spread goes negative for a period and then out of the red prior to recessions, and is thus considered a reliable leading indicator for recessions. The lead time for recessions is quite a range - after going negative, recessions have begun anywhere from 16 to 62 weeks later. We also can see a false positive in 1998 where the spread went negative for a short period. For the 2009 recession, the spread went negative a couple of different times before rising.

If we use the first negative spread date as our starting point, the average number of weeks leading up to a recession is 37, or about nine months. If we use the last positive spread date after being negative before a recession, the average is 17 weeks, or 4.25 months and the median is 14 weeks, or 3.5 months.

As of September 8th, the 10-2 spread has been negative for 297 days (~42 weeks or ~9.9 months).

10-year yield minus 2-year yield

10 year treasury yield, 2 year treasury yield, and Fed Funds Rate

For another perspective on the yield curve, the 10-3mo spread below utilizes an even shorter-term maturity.

10-year yield minus 3mo-year yield

The 30-Year Fixed Rate Mortgage

The latest Freddie Mac Weekly Primary Mortgage Market Survey put the 30-year fixed rate at 7.12%. Here is a long look back, courtesy of a FRED graph, of the 30-year fixed-rate mortgage average, which began in April of 1971.

Freddie Mac 30-Year

Now let's see the 10-year against the S&P 500 with some notes on Federal Reserve intervention. Fed policy has been a major influence on market behavior.

S&P 500, Fed Fund Rate, and 10-Year Yield with Federal Reserve Intervention

For a long-term view of weekly Treasury yields, also focusing on the 10-year, see our latest Treasury Yields in Perspective update.

ETFs associated with Treasuries include: iShares 1-3 Year Treasury Bond ETF (SHY), iShares 7-10 Year Treasury Bond ETF (IEF), and iShares 20+ Year Treasury Bond ETF (TLT).

This article was originally written by Doug Short. From 2016-2022, it was improved upon and updated by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at VettaFi | Advisor Perspectives

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