US Treasury yields, Oct 20, 2026: 30-year falls to 5.42% as the curve flattens

Long-term yields have fallen well below their early-October highs

Treasury yields show what the US government pays to borrow. They also serve as a benchmark for mortgages and company loans. The Federal Reserve's H.15 release of selected interest rates shows these yields on Oct 20:

• 30-year: 5.42%. That is down 6 basis points (bp, hundredths of a percentage point) on the day and 25bp below the 5.67% high of Oct 7.
• 10-year: 5.12%. That is down 3bp on the day and 19bp below the Oct 5 high of 5.31%. It is still well above the 4.96% of Sep 22.

Lower inflation-adjusted yields explain almost all of the drop

The 10-year inflation-indexed yield shows the return investors expect after inflation. It fell to 2.77%, from 2.95% on Oct 5. The 10-year nominal yield is about 2.35% above the inflation-indexed yield, roughly the same gap as on Oct 5. This gap is a measure of expected inflation. So investors are lowering the real return they expect, or the extra pay they demand for holding long bonds. They are not changing their inflation outlook.

Short-term rates still point to more Federal Reserve rate increases

• The 2-year yield rose 2bp to 4.79%. The 5-year was unchanged at 4.94%.
• The 10-year yield is now about 33bp above the 2-year yield, down from about 47bp on Oct 5. This narrowing is known as a flattening of the yield curve.
• The effective federal funds rate is the overnight rate banks charge each other. It has been 3.88% since Sep 17, when it rose from 3.63% after the September rate increase. Even so, the 3-month Treasury bill yield is 4.26% and the 1-month yield is 4.10%.

Rates tied to Fed policy have not changed

The primary credit rate, which the Fed charges banks for short-term loans, is 4.00%. Banks' prime lending rate is 7.00%. The rate on 30-day nonfinancial commercial paper, a form of short-term company borrowing, is 3.97%.