The 10-year Treasury yield is back at 4.57 percent: nine months that re-steepened the curve

Key takeaways

The 10-year Treasury yield averaged 4.57 percent in July, up from 4.06 last October and the highest monthly average since January 2025. Everything priced off the long end, mortgages included, costs about half a point more than nine months ago.
The climb happened while the federal funds rate fell and then sat still: 4.09 percent last October, 3.63 since January. The gap between the two went from level to 0.84 points, so the entire re-steepening came from the bond market, not the Fed.
The average rate the Treasury pays on its debt is 3.41 percent, more than a point below the market rate. Every month the 10-year holds here, maturing debt refinances upward and the federal interest bill grinds higher.

What's happening

Last October the 10-year yield averaged 4.06 percent, its low for 2025, and sat exactly level with the policy rate. The nine months since have been a nearly uninterrupted climb: 4.14 in December, 4.25 in March, 4.48 in May, 4.57 in July.

The federal funds rate spent the same nine months going the other way and then nowhere: it fell from 4.09 to 3.72 by December and has held at 3.63 or 3.64 since January. Whatever moved the long end, it was not policy.

+0.84pts

The gap between the 10-year Treasury yield and the federal funds rate in June 2026. Last October the two were level. The re-steepening came entirely from the long end: the 10-year rose half a point while the policy rate fell and then held.

Why the long end matters more than the policy rate

Mortgages, corporate bonds, and long-term business credit price off the 10-year, so the round trip undid, for borrowers, most of what the Fed's cuts were expected to deliver. As we showed in our analysis of the cutting cycle, this is the historical exception: cutting cycles usually pull the 10-year down with them.

The government is on the same side of the trade as every other borrower. The average rate the Treasury pays across all its debt was 3.41 percent in June, 1.06 points below the market rate, because much of the outstanding stock still carries older, cheaper coupons. That gap is a schedule, not a cushion: as debt matures it refinances near the 10-year, which is why the interest bill keeps compounding even with the policy rate 1.7 points off its peak.

What the chart shows

The cycle's ceiling is October 2023, when the 10-year averaged 4.80 percent. It touched 4.63 in January 2025, spent the spring and summer easing toward October's 4.06, and has now retraced most of the way back: July's 4.57 leaves it 23 basis points from the peak. The chart's third line, the Treasury's average paid rate, moves like a slow average of the other two, up from 1.56 percent in January 2022 to 3.41 and still rising a few hundredths each month.

What to watch

Three markers. The October 2023 peak of 4.80: a monthly average above it would be the highest since July 2007 rather than a retest of the cycle. The spread: 0.84 points is the market charging for inflation and supply risk, and it widens or narrows with each CPI print, with inflation back near 4 percent being the reading it currently reflects. And the Treasury's average rate: at 3.41 against a 4.57 market rate, the direction of the interest bill is set for months regardless of what the Fed does next.

Common questions

What is the 10-year Treasury yield right now?

It averaged 4.57 percent in July 2026, the highest monthly average since January 2025's 4.63. Last October it averaged 4.06.

Why are Treasury yields rising while the Fed cuts rates?

Long-term yields are set by the bond market's view of inflation and the supply of new debt, not by the policy rate. Consumer price inflation ran above 4 percent in the year through May 2026, and federal debt grew $3.5 trillion over the past year, so investors are charging more to hold long bonds even as the overnight rate falls.

What does the gap between the 10-year yield and the fed funds rate mean?

It is the extra return investors demand for lending long instead of overnight. In October 2025 the gap was zero; by June 2026 it was 0.84 points. A widening gap driven by the long end signals the market pricing more inflation or supply risk over the coming decade.

How high did the 10-year yield get this cycle?

A monthly average of 4.80 percent in October 2023. July 2026's 4.57 is 23 basis points below that peak.

Data: 10-year Treasury constant maturity yield and effective federal funds rate (FRED, monthly averages) and the average interest rate on total outstanding US debt (US Treasury Fiscal Data, monthly, 2001 to June 2026), as published in the Kitegraph library. Spreads are computed from the monthly series; the chart window starts at 2015.