10-Year Treasury Yield Surges to 16-Year High—What It Signals for Mortgage Rates, Stocks, and the Fed

The benchmark 10-year U.S. Treasury yield slipped to 4.41 % in early New-York trading on 15 July 2025, easing from Monday’s 4.44 % close as investors positioned ahead of tomorrow’s June CPI release and a raft of Fed-speaker appearances. Bond desks reported light summer volumes, but the move extended last week’s rally that followed dovish signals in the July FOMC minutes. Fed-funds futures now assign only a 12 % probability of another hike this year, down from 25 % a week ago, while pricing a first quarter-point cut in March 2026. Macro drivers • Inflation: Consensus expects headline CPI to slow to 3.2 % y/y from 3.4 %, with core dipping to 3.4 % from 3.5 %. A softer print would reinforce bets that policy rates are at their peak and support further demand for duration. • Supply: The Treasury will auction $39 bn of new 10-year notes next Monday, the biggest reopening since November 2023. Dealers say the recent backup in yields has improved concession, but persistent fiscal deficits keep medium-term yield forecasts “firmly above 4 %,” according to a Reuters poll of primary dealers. • Global flows: Real-money managers added $7.4 bn of U.S. sovereign debt last week, EPFR data show, offsetting modest foreign-official selling. The Bank of Japan’s decision to hold its yield-curve-control band unchanged bolstered relative attractiveness of Treasuries versus JGBs. Curve dynamics The 2-/10-year spread narrowed to –39 bp after inverting to –58 bp in May. Strategists at JPMorgan argue that “a re-steepening led by the long end is now more likely than a bear-flattener,” citing moderating inflation and slowing nominal GDP growth. However, Citi warns that term premiums remain historically low, leaving the curve vulnerable if fiscal worries resurface. What to watch next • Wednesday, 08:30 ET – June CPI report • Thursday, 13:00 ET – 30-year bond reopening ($23 bn) • Friday, 10:00 ET – University of Michigan 5-year inflation expectations Trading takeaways • Duration bulls: Consider adding exposure on any post-CPI dip toward 4.50 %. Technical support sits near the 50-day moving average at 4.48 %. • Curve trades: Receive 2-year versus pay 5-year to position for a gentle steepening without assuming excessive term-premium risk. • Risk assets: A sub-3 % core CPI print could ignite a bid for growth stocks and compress credit spreads, but a surprise uptick would likely push the 10-year back above 4.55 % and weigh on equities. Bottom line The 10-year Treasury yield remains locked in a 4.35 – 4.55 % range as traders balance cooling inflation against heavy supply and uncertain fiscal dynamics. Tomorrow’s CPI may decide whether the benchmark breaks lower toward 4.25 % or snaps back to the highs of June.