U.S. Treasury yields are expected to diverge over the coming year, with longer-term rates rising while shorter-term yields fall, according to a Reuters survey of nearly 50 bond strategists.
The 10-year Treasury yield, which stands near 4.27%, is forecast to edge up to about 4.30% and hold around that level through the next year. Strategists cite persistent inflationary pressures—including the impact of elevated tariffs, which are at their highest levels since the Great Depression—and a sharp increase in government debt issuance as key factors supporting higher long-term yields.
By contrast, the 2-year Treasury yield is projected to decline, slipping to roughly 3.50% within a year as markets begin to price in Federal Reserve rate cuts in response to softer employment data. The expectation of easier monetary policy at the short end of the curve is driving forecasts for lower near-term yields.
As a result, the yield curve is expected to steepen, with the spread between the 2-year and 10-year yields widening from about 50 basis points today to roughly 80 basis points over the next year. That steepening reflects a market view that growth and inflation risks will diverge across horizons: shorter-term rates fall on easing policy expectations, while longer-term rates rise on persistent inflation concerns and increased supply of government bonds.
The anticipated divergence underscores the complex interplay among inflation trends, fiscal issuance, and monetary policy. Investors and policymakers will watch developments in tariffs, employment data, and Treasury supply closely, since those factors will influence whether the projected path of yields materializes.