US 10-year yields drop to 4.35%, falling below 200-day moving average

US 10-year yields drop to 4.35%, falling below 200-day moving average

US 10-year yields have dropped to 4.35%, marking a significant decline from recent highs and falling below the 200-day moving average. This shift in yields, which has been a notable trend in recent weeks, reflects a broader market sentiment that is becoming increasingly cautious about economic prospects.

The 10-2 Year Treasury Yield Spread, which measures the difference between the 10-year and 2-year Treasury rates, has also been a key indicator. As of July 2, 2025, the spread stands at 0.56%, lower than the long-term average of 0.85% [1]. This is a significant drop from the previous market day and marks a continuation of a downward trend that began earlier in the year. A negative 10-2 yield spread has historically been viewed as a precursor to a recessionary period, although it typically occurs 6-24 months before the recession [1].

The recent drop in yields can also be attributed to increased issuance of shorter-dated debt by the Treasury. Barclays expects $410 billion worth of bills to be issued over the current quarter, while J.P. Morgan and Deutsche Bank predict around $629 billion and $500 billion, respectively [2]. This increased supply of shorter-dated debt has led to higher yields on shorter-dated instruments as buyers demand a premium for holding extra debt.

Investors and financial professionals should closely monitor these developments. The flattening yield curve and the increased issuance of short-term debt suggest a shift in market expectations, potentially indicating a slowdown in economic growth. However, it is essential to consider other economic indicators and market data to form a comprehensive view of the current economic landscape.

References:
[1] https://ycharts.com/indicators/10_2_year_treasury_yield_spread
[2] https://www.barrons.com/livecoverage/stock-market-news-today-071425/card/it-s-time-to-look-at-the-yield-curve-again-l0UehDkAFmQ5F4EgiI6T