Treasury Yield Gap Widens on Fed Outlook, Corporate Bond Supply

US Treasuries approached a key milestone Tuesday as 10-year yields reached the highest level relative to two-year rates in nearly nine months, signaling traders’ bets on Federal Reserve interest-rate cuts in 2026.

While the yield changes were small, the 10-year briefly exceeded the two-year by more than 72 basis points for the first time since April. Also known as yield-curve steepening, the shift is rooted in expectations for further Fed policy easing. A surge in corporate-bond sales to start the year is exacerbating the dynamic by pressuring long-term yields higher.

The differential between two- and 10-year yields has scope to ...