10-Year Treasury Yield Closes at 5.31%, Highest Since 2002

The 10-year Treasury yield closed at 5.31% on Monday, Oct. 5, according to the Treasury Department's daily par yield curve. That is the highest close since May 2002, according to Federal Reserve historical data published on FRED. The two-year yield ended at 4.84%, so the curve kept steepening.

Where the Treasury curve stood on Oct. 5

Maturity	Sept. 30	Oct. 2	Oct. 5	Change since Sept. 30
3-month	4.20%	4.19%	4.22%	+0.02
2-year	4.88%	4.83%	4.84%	−0.04
5-year	5.09%	5.06%	5.06%	−0.03
10-year	5.29%	5.28%	5.31%	+0.02
30-year	5.64%	5.63%	5.66%	+0.02
10-year minus 2-year	0.41	0.45	0.47	+0.06

Source: U.S. Department of the Treasury, daily par yield curve rates.

The 30-year yield closed at 5.66%, its highest since July 2002 on FRED's data. Short and long yields have moved in opposite directions since September ended. The two-year yield, which tracks expectations for Fed policy, is down 0.04 percentage point. The 10-year is up 0.02.

Why is the yield curve steepening?

Long-term yields are rising while short-term yields hold steady or fall. The Treasury data alone cannot say why. But it shows investors are asking more to lend for 10 or 30 years, even as rate expectations for the next two years have not risen further.

The September jobs report did not push short-term yields higher. Nonfarm payrolls rose 29,000 and the unemployment rate rose to 4.2%, the Bureau of Labor Statistics said on Oct. 2. Our data brief on the September jobs report has the full numbers.

Credit spreads widened in the last week of September

Corporate bond spreads over Treasuries rose quickly into early October, according to ICE BofA index data published on FRED.

Spread (option-adjusted)	Sept. 21	Oct. 1	Oct. 2
High-yield corporate index	2.66	3.24	3.10
Investment-grade corporate index	0.77	0.86	0.85

Figures are percentage points.

The high-yield spread's 3.24 reading on Oct. 1 was its highest since March 31. The investment-grade spread's 0.86 was its highest since early April. Both eased slightly on Oct. 2, the latest data available. Because spreads sit on top of Treasury yields, the total yield on corporate debt rose more than Treasuries alone.

What the Fed is saying

Fed Vice Chair Philip Jefferson pointed to the bond market in a speech on Oct. 1. "Since our September meeting, yields across the term structure have increased further, a sign that investors are reassessing the evolving macroeconomic landscape," he said. He also said "inflation has been too high for too long," and that future policy moves "should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks."

The Fed raised its target range by a quarter point to 3.75% to 4% on Sept. 16. Its next decision is due Oct. 28, at the end of the Oct. 27–28 meeting. See our Fed meeting calendar.

What it means for borrowers

Fixed-rate credit is priced off the long end. Freddie Mac said the average 30-year fixed mortgage rate was 7.28% in the week of Oct. 1, up from 7.03% a week earlier. Floating-rate credit has held steady: the prime rate stayed at 7% and the SOFR benchmark at 3.88% on Oct. 2, FRED data show. Our analysis of September's curve explains how each part of the curve reaches loan pricing.