Yield Curve Analysis

Date	3-mth	6-mth	1-yr	2-yr	5-yr	10-yr	30-yr	AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More	BaaBaa represent the lowest rung of investment-grade corporate debt with moderate credit risk, making them susceptible to higher default risk than Aaa bonds. More	HY-OAS	5Y5Y5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More Forward	5Y Breakeven Inflation
5/8/2026	3.69	3.74	3.75	3.90	4.02	4.38	4.95	5.47	6.03	2.81	2.28	2.62
5/1/2026	3.68	3.71	3.73	3.88	4.02	4.39	4.97	5.49	6.08	2.77	2.27	2.69
4/24/2026	3.69	3.71	3.67	3.78	3.92	4.31	4.91	5.41	6.01	2.86	2.23	2.61
4/17/2026	3.70	3.69	3.64	3.71	3.84	4.26	4.88	5.36	5.98	2.83	2.16	2.56
4/10/2026	3.69	3.72	3.70	3.81	3.94	4.31	4.91	5.42	6.03	2.94	2.14	2.58
4/3/2026	3.71	3.73	3.72	3.84	3.99	4.35	4.91	5.44	6.05	3.13	2.11	2.61
3/27/2026	3.73	3.75	3.77	3.88	4.06	4.44	4.98	5.66	6.22	3.42	2.06	2.56
3/20/2026	3.74	3.79	3.80	3.88	4.01	4.39	4.96	5.61	6.18	3.24	2.13	2.63
3/13/2026	3.72	3.70	3.66	3.73	3.87	4.28	4.90	5.60	6.11	3.28	2.11	2.61
3/6/2026	3.71	3.68	3.56	3.53	3.67	4.10	4.73	5.32	5.86	3.13	2.14	2.56
2/27/2026	3.68	3.61	3.48	3.42	3.58	4.02	4.64	5.25	5.77	3.10	2.1	2.40
2/20/2026	3.69	3.60	3.51	3.46	3.65	4.08	4.72	5.25	5.76	2.86	2.13	2.43
2/13/2026	3.68	3.59	3.42	3.40	3.61	4.04	4.69	5.31	5.81	2.95	2.12	2.42
2/6/2026	3.68	3.59	3.45	3.54	3.80	4.26	4.85	5.40	5.90	2.87	2.18	2.50
1/30/2026	3.67	3.61	3.48	3.54	3.81	4.24	4.87	5.35	5.86	2.80	2.19	2.53

Source: Federal Reserve Economic Data (FRED) is an online database created and maintained by the Research Department at the Federal Reserve Bank of St. Louis

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This week’s curve dynamics suggest a market that is beginning to stabilize following the recent long-end repricing. Treasury yields were largely steady, with only modest movement across maturities, signaling that markets may be temporarily settling into a “higher-for-longer” framework rather than aggressively repricing growth or policy expectations.

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Macro Structure: Stabilization After Long-End Pressure

• • • • Front end:
        • 3M → 3.69% (slightly higher)
        • 1Y → 3.75% (slightly higher)
        • 2Y → 3.90% (slightly higher)

→ Short-term yields remain relatively anchored, reinforcing expectations that the Fed is likely to stay on hold in the near term.

• • • • Long end:
        • 10Y → 4.38% (slightly lower)
        • 30Y → 4.95% (slightly lower)

→ The modest pullback in longer-duration yields suggests some easing in term premiumThe "extra" return investors demand for holding a long-term bond instead of a series of short-term ones. It acts as a safety buffer, compensating the lender for the increased risk that inflation or interest rates might change unexpectedly over a longer period. More pressure after last week’s sharp move higher.

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Curve & Inflation Signals

• • • • 10Y–3M spread: remains healthy at roughly +69bp, continuing to indicate that recession concerns are contained for now.
      • 30Y–2Y spread: held near +105bp, suggesting longer-term growth and inflation expectations remain elevated but stable.

→ Inflation expectations remain firm:

• • • • 5Y5Y5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More Forward: 2.28% (slightly higher)
      • 5Y Breakeven Inflation: 2.62% (slightly lower)

→ This combination suggests markets still expect structurally persistent inflation over the medium term, though near-term inflation anxiety eased somewhat during the week.

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Credit Markets

Credit conditions remain constructive:

• • • • AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More: 5.47%
      • BaaBaa represent the lowest rung of investment-grade corporate debt with moderate credit risk, making them susceptible to higher default risk than Aaa bonds. More: 6.03%
      • Aaa–BaaBaa represent the lowest rung of investment-grade corporate debt with moderate credit risk, making them susceptible to higher default risk than Aaa bonds. More spread: remains relatively tight
      • HY OAS: 2.81% (+281bp)

→ Investment-grade spreads continue to show limited signs of stress, reinforcing the view that financial conditions, while tighter than earlier in the cycle, are not yet restrictive enough to materially pressure credit markets.

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MOVE Index

The ICE BofA U.S. Bond Market Option Volatility Estimate (MOVE) Index measures implied volatility of U.S. Treasury yields, derived from options on Treasuries (primarily 2Y–30Y maturities). It’s commonly called the “VIX for bonds”, but more precisely, it reflects the market’s expectation of how much Treasury yields will move, not bond prices. It is a critical cross-asset signal.

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• • • • Current reading: 67.25 (↓ from 70.41)
      • Leading Indicator: Rate volatility often transmits into equity volatility because discount ratesThe interest rate used to determine what a future sum of money is worth today. It accounts for the "time value of money"—the principle that a dollar today is worth more than a dollar tomorrow—and the risk that a future payment might not actually be received. More underpin asset valuations.
      • Trend: Stabilizing after the ease from recent elevated levels.
      • Interpretation: The decline in rate volatility points to a calmer Treasury market after recent volatility in the long end. Lower rate volatility generally supports both equities and credit by reducing uncertainty around discount ratesThe interest rate used to determine what a future sum of money is worth today. It accounts for the "time value of money"—the principle that a dollar today is worth more than a dollar tomorrow—and the risk that a future payment might not actually be received. More and financing conditions.
      • Expected 10yr ranges (by timeframe):

Timeframe	Low (%)	High (%)
1 week	4.29	4.47
1 month	4.19	4.57
1 year	3.71	5.05

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Impact on Equities

• • • • Equity Valuation Pressure: The 10-year yield at 4.38% remains within the critical 4.00%–4.50% range, continuing to act as a constraint on equity valuations, especially for growth stocks. Higher rates decrease the present value of future earnings, and the recent uptick in yields may add additional pressure to equity multiples.

Most Discounted-Cash-Flow (DCF) models use the 10-yr as the “risk-free” rate. So, as the discount rateThe interest rate used to determine what a future sum of money is worth today. It accounts for the "time value of money"—the principle that a dollar today is worth more than a dollar tomorrow—and the risk that a future payment might not actually be received. More rises, the present value (PV) of future cash flows declines.

• • • • Normal Equity Risk Premium (ERP): the extra return investors expect for choosing stocks over “safe” Treasuries is currently very compressed. While earnings yields provide a baseline for expected returns, the sustainability of those returns depends heavily on the composition of nominal growth. With real growth subdued and inflation doing most of the work, the quality of earnings expansion becomes a key risk for equity valuations.

The “quality” of the 2025 Nominal GDP is low, as the latest release of Real GDP ^(BEA) is only 0.48%, while inflation ^{(GDP Price Deflator)} is around 3.74%. This puts Nominal GDP (2025) at 4.24%. In other words, ~88.2% of the increase in the dollar value of the economy (Nominal GDP) in 2025 was due to higher prices. If this trend continues, then the threat of stagflationAn economic anomaly characterized by the simultaneous occurrence of stagnant growth and high unemployment alongside persistent, rising inflationary pressure. More rises.

• • • • Relative Yield Competition
        • • Treasuries: 3.69% – 4.95%
          • IG Credit: 5.47% – 6.03%

→ Fixed income continues to present a credible alternative to equities, particularly for defensive and income-focused allocation.

• • • • Risk Appetite
        • • Credit stability + moderate MOVE = risk still “on,” but less complacent
          • Stabilizing volatility and yields suggest steadying financial conditions at the margin
          • High-yield spreads remain orderly, indicating that credit markets are not pricing in meaningful default risk or recession stress at this stage. 

• • • • MOVE Index Influence:
        → The stable MOVE index suggests that rate volatility is still relatively low, which is generally supportive for equities. However, the underlying risks of weak growth and persistent inflation could create volatility once the market begins to reassess future conditions.

• • • • Growth vs. Inflation Narrative:
        → The continued pressure in long-term yields and the uptick in the 5Y5Y Forward rate5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More (now at 2.28%) suggests that markets are adjusting to a view of slightly higher inflation over the medium term. This could imply persistent headwinds for growth as investors hedge against future inflation.

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Bottom Line

This week’s data reflects a market transitioning from active repricing toward short-term stabilization.

Key themes:

• • • • Treasury yields stabilized after recent long-end pressure
      • Inflation expectations remain firm but not accelerating sharply
      • Credit markets continue to signal confidence rather than stress
      • The modest widening in HY-OAS reflects a more selective risk environment rather than a broad deterioration in credit conditions.
      • Lower rate volatility supports a more constructive risk backdrop

Overall, the environment remains consistent with a higher-for-longer regime, but without signs of disorderly tightening or growing recession fear.

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Metric	(bp)	Comment
2yr - 3mo	+21	Terminal rateThe anticipated peak interest rate at which a central bank concludes a monetary tightening cycle to achieve a sufficiently restrictive policy stance. More might have been reached.
10yr - 3mo	+69	Recession worries fading
10yr - 2yr	+48	Fairly robust signal of economic "normalization"
AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More - 10yr	+109	healthy, standard spread for top-tier credit, indicating no signs of stress in the plumbing of the financial system.
HY-OAS	+281	credit markets are not pricing in meaningful default risk or recession stress
MOVE Index	+67.25	Dampening volatility is a significant “calming” signal.
5Y5Y Forward Rate5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More	2.28%	Fed policy remains restrictive relative to its longer-run equilibrium.
5Y Breakeven Inflation Rate	2.62%	Inflation expectations remain somewhat above target