| 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 |
|---|---|---|---|---|---|---|---|---|---|---|
| 4/10/2026 | 3.69 | 3.72 | 3.70 | 3.81 | 3.94 | 4.31 | 4.91 | 5.42 | 6.03 | 2.94 |
| 4/3/2026 | 3.71 | 3.73 | 3.72 | 3.84 | 3.99 | 4.35 | 4.91 | 5.44 | 6.05 | 3.13 |
| 3/27/2026 | 3.73 | 3.75 | 3.77 | 3.88 | 4.06 | 4.44 | 4.98 | 5.66 | 6.22 | 3.42 |
| 3/20/2026 | 3.74 | 3.79 | 3.80 | 3.88 | 4.01 | 4.39 | 4.96 | 5.61 | 6.18 | 3.24 |
| 3/13/2026 | 3.72 | 3.70 | 3.66 | 3.73 | 3.87 | 4.28 | 4.90 | 5.60 | 6.11 | 3.28 |
| 3/6/2026 | 3.71 | 3.68 | 3.56 | 3.53 | 3.67 | 4.10 | 4.73 | 5.32 | 5.86 | 3.13 |
| 2/27/2026 | 3.68 | 3.61 | 3.48 | 3.42 | 3.58 | 4.02 | 4.64 | 5.25 | 5.77 | 3.10 |
| 2/20/2026 | 3.69 | 3.60 | 3.51 | 3.46 | 3.65 | 4.08 | 4.72 | 5.25 | 5.76 | 2.86 |
| 2/13/2026 | 3.68 | 3.59 | 3.42 | 3.40 | 3.61 | 4.04 | 4.69 | 5.31 | 5.81 | 2.95 |
| 2/6/2026 | 3.68 | 3.59 | 3.45 | 3.54 | 3.80 | 4.26 | 4.85 | 5.40 | 5.90 | 2.87 |
| 1/30/2026 | 3.67 | 3.61 | 3.48 | 3.54 | 3.81 | 4.24 | 4.87 | 5.35 | 5.86 | 2.80 |
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
This week’s data marks a “partial bull steepeningA bull steepener occurs when short-term rates fall faster than long-term rates and is generally associated with rising recessionary fears. More retracement” of the prior “bear SteepenerA bear steepener occurs when long-term rates rise faster than short-term rates and is generally associated with rising inflationary expectations. More“. Yields fell across the entire curve, but the long end saw more modest declines than the belly and the short end, leading to a slight downward shift in the overall rate environment.
Yield Curve Analysis
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- YC Normalizing (with a downward tilt): The curve remains upward-sloping, but the “surge” has cooled. Markets are recalibrating after the previous week’s aggressive run-up, likely reacting to cooling inflation expectations or a flight to safety.
- Long-End Stabilization: The 10-year (-4bp to 4.31%) & 30-year (flat) have pulled back modestly from recent highs, while the 30-year has stabilized—suggesting structural pressures (supply, 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) still intact.
- Short-End Softness: The stabilizing 3-month (-2bp to 3.69%) and 1-year (-2bp to 3.70%) yields are consistent with a market leaning toward a Fed pause.
- “Fed Policy” (2yr – 3mo): This spread (at +13bp) suggests the market is moving away from peak inversion dynamics, but not necessarily in a strong growth regime.
- 10y-3m Spread (+62bp): While still healthily positive (non-recessionary), the lack of further steepening suggests the recent pro-growth repricing has paused.
- 30y–2y Spread (+110bp): The market is still pricing in a significantly higher long-term neutral rateThe long-term theoretical level at which interest rates neither stimulate nor restrict economic growth. More, but the urgency of that repricing faded this week.
Credit Risk & Spreads
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- AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More: Yields dropped to 5.42%. Notably, the spread over the 30-year Treasury (+51bp) indicates robust demand for high-quality duration as investors look to lock in yields while they are still elevated.
- 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: The spread between 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 and the 10-year Treasury widened slightly to +172bp while the gap between 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 remains fairly tight at (+61bp), signaling that credit markets remain wide open for investment-grade issuers.
- High-Yield OAS (Option-Adjusted SpreadThe yield premium over risk-free benchmarks that isolates a bond’s credit and liquidity risk by stripping out the cost of embedded options. A widening OAS typically signals deteriorating credit conditions, indicating a higher probability of corporate defaults—particularly among issuers with overleveraged balance sheets. More): The HY-OAS dropped further (-19bp) as the reversal of the surge to +342bp continues and reduces near-term stress concerns. Risk appetite is still strong.
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.
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- Current reading: 72.15 bp.
- 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.
- Interpretation: Dampening volatility is a significant “calming” signal. The market’s 1σ implied range for rate moves over the next year has compressed to ± 0.72%, under a normal distribution assumption. Lower rate volatility typically provides a “green light” for equity markets and tighter credit spreadsIn the bond market, it is the difference in yield between a corporate bond and a "risk-free" government bond of the same maturity. It represents the extra interest investors demand to compensate for the risk that a company might default. More. However, the specter of rate uncertainty lingers.
- Expected 10yr ranges (by timeframe):
| Timeframe | Low (%) | High (%) |
|---|---|---|
| 1 week | 4.21 | 4.41 |
| 1 month | 4.10 | 4.52 |
| 1 year | 3.59 | 5.03 |
Impact on Equities
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- Equity Valuation Pressure: A note of caution for equity investors – the 10-year yield crossing the 4.00% – 4.50% threshold often acts as a headwind for stock market valuations (specifically tech/growth stocks), 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 for future earnings increases. High-growth companies with earnings projected far into the future are most likely to be affected by this, as Price-to-Earnings (P/E) multiples will be pulled lower compared to the “ultra-low rate” era.
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.
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- Normal Equity Risk Premium (ERP): the extra return investors expect for choosing stocks over “safe” Treasuries is currently around its historical average. 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.
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- Competitive Yields: For many investors, a 4.31% to 4.91% guaranteed return on Treasuries or a 5.42% to 6.03% yield on investment-grade bonds makes equities look “expensive” on a relative-value basis.
- Risk Appetite: While declining from its recent highs (+342bp) and well below the long-term average of +520bp, the volatility in HY-OAS spread over the past few weeks is a clear sign that investors are repricing risk.
- MOVE index: While a plunge in this typically encourages a rotation into risk, this newfound ‘certainty’ may be underpricing the risks tied to weak real growth and persistent inflation.
- Small-Cap Relief: The continued tightening in HY-OAS (-19bp) should provide a bit of respite for small-caps. Lower credit spreadsIn the bond market, it is the difference in yield between a corporate bond and a "risk-free" government bond of the same maturity. It represents the extra interest investors demand to compensate for the risk that a company might default. More reduce the perceived “refinancing wall” risk that was haunting lower-quality balance sheetsA financial "snapshot" that reveals exactly what a company owns and owes at a specific moment in time. It follows the fundamental formula: Assets = Liabilities + Equity. By subtracting what is owed (liabilities) from what is owned (assets), the balance sheet shows the "book value" or the net worth belonging to the owners. More a week ago.
- Confidence in Growth or Worries over Inflation: The still-elevated level of long-end yields (10-yr & 30-yr) signals that investors either:
- Expect solid economic growth and successful AI-related productivity gains, which justifies keeping equity valuations elevated despite high interest rates or
- They are concerned about the US government needing to fund the deficit by flooding the market with massive bond issuances.
Bottom Line
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- The aggressive bear steepenerA bear steepener occurs when long-term rates rise faster than short-term rates and is generally associated with rising inflationary expectations. More of two weeks ago seems to have taken a breather. The fear that “something might break” has eased into a calmer environment defined by plummeting rate volatility (MOVE Index) and a recovery in credit appetite. While the long-term “higher for longer” theme is still visible in the 30-year yield, the immediate pressure on valuations and credit risk has eased significantly.
| Metric | (bp) | Comment |
|---|---|---|
| 2yr - 3mo | +12 | 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 | +62 | Recession worries fading |
| 10yr - 2yr | +50 | 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 | +111 | healthy, standard spread for top-tier credit, indicating no signs of stress in the plumbing of the financial system. |
| HY-OAS | +294 | Market reassessing credit crunch odds. |
| MOVE Index | +72.15 | Dampening volatility is a significant “calming” signal. |
