U.S. Treasury Yields Sink to Lowest Level Since 2024

Yield levels for the benchmark are important because they set the basis for mortgage rates and sentiment about the economy. (Dreamstime)

The U.S. rates market had barely moved a muscle since Friday, as the benchmark 10-year Treasury yield traded just around 4%, a level that came to be known as the line in the sand for market. Now, it’s crossed that level.

The 10-year yield settled at 3.976% on Thursday afternoon, its lowest level in 2025. The last and only time the 10-year settled below the 4% level in 2025 was on April 4, when it closed at 3.992% following President Donald Trump’s tariff announcements.

Yield levels for the benchmark are important because they set the basis for mortgage rates and sentiment about the economy. Lower yields are also good for existing investors in bonds because prices and yields move in opposite directions.

The dearth of data in a government shutdown, which is now in its 16th day, had created a landscape that left the market listless. But a fresh onslaught of U.S.-China tensions triggered last week, coupled with concerns this week about bad loans extended by banks, has been pushing yields on longer-term Treasuries lower. On Monday, Barron’s noted that long-term Treasury yields were likely headed even lower.

The 10-year yield “looked like it wanted to break below 4%. It tried a few times a month ago. Today it finally made it,” Padhraic Garvey, regional head of research for Americas at ING, told Barron’s in an email.

A pair of regional survey data released Thursday gave the Treasury market its final push. The Federal Reserve Bank of New York said services activity in the state, as well as in parts of New Jersey and Connecticut, contracted sharply in October. Manufacturing activity in the U.S. mid-Atlantic region as measured by the Philadelphia Fed also dropped in October to a six-month low. Weak economic data encouraged investors to hide out in the safety of bonds.

“These are not big hitters, but point to macro weakness,” Garvey said.

Meanwhile, stress has been building across the board, from the recent gold rally to expert commentary at the International Monetary Fund conference about softening in the U.S. economy. Federal Reserve Chair Jerome Powell indicated on Tuesday that the central bank is on track for more rate cuts, cementing the idea that the economy is in need of a boost.

Gas prices also play a role. The average gasoline price at the pump, a key driver for inflation, has fallen 4% over the past month, signaling that inflation is tracking lower. Lower inflation drives yields down.

“Due to the government’s shutdown, we don’t have [the September consumer price index reading] yet to see the impact, but we do have inflation swaps. They are clearly following gasoline prices lower, which also explains much of the decline in yields since late August,” wrote the team at macro-investment research firm Bear Traps in a note to clients.

The question now is whether the move below 4% is a sustainable breach as the market approaches Oct. 24, when the Bureau of Labor Statistics is due to release September CPI data.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com