Treasury Yields Snapshot: July 31, 2026
The yield on the 10-year note finished July 31, 2026 at 4.75%, while the 2-year note ended at 4.28%. The 10-2 spread is widely considered a reliable leading indicator for recessions.
Intelligence analysis by Llama
The yield on the 10-year note finished July 31, 2026 at 4.75%, while the 2-year note ended at 4.28%. The 10-2 spread is widely considered a reliable leading indicator for recessions. The latest Freddie Mac Weekly Primary Mortgage Market Survey put the 30-year fixed rate at 6.66%, unchanged from last week and still the highest level since last August.
Imagine you're trying to predict when a big storm is coming. The 10-2 spread is like a weather forecast that tells us if a recession is likely to happen. When the spread is negative, it means a recession is more likely to happen in the next 11 months.
Analysis
A $60B Vote of Confidence
The yield on the 10-year note finished July 31, 2026 at 4.75%, while the 2-year note ended at 4.28%. This development is significant because the 10-2 spread is widely considered a reliable leading indicator for recessions. The spread was negative from July 2022 to August 2024, a pattern that historically signals elevated recession risk with an average 11-month lead time.
Why Cursor?
The 10-3mo spread was negative from October 2022 to December 2024, suggesting continued caution as this indicator also typically leads recessions by several months. This is a crucial point because it indicates that the current economic conditions are not favorable for growth.
The Road Ahead
Mortgage rates initially diverged from the Federal Funds Rate during the September 2024 rate-cutting cycle but have recently begun declining, aligning more closely with Fed policy. This development is significant because it suggests that the Federal Reserve is taking steps to mitigate the impact of the current economic conditions on the housing market.
Key points
- The yield on the 10-year note finished July 31, 2026 at 4.75%, while the 2-year note ended at 4.28%.
- The 10-2 spread is widely considered a reliable leading indicator for recessions.
- The latest Freddie Mac Weekly Primary Mortgage Market Survey put the 30-year fixed rate at 6.66%, unchanged from last week and still the highest level since last August.
If the Federal Reserve continues to take steps to mitigate the impact of the current economic conditions on the housing market, mortgage rates may decline further, leading to a more favorable environment for growth.
The current negative 10-2 spread suggests elevated recession risk with an average 11-month lead time, which could lead to a decline in economic activity and a decrease in stock prices.
