Reading the Curve: What Treasury Yields Are Telling Us at Mid-Year

The U.S. Treasury yield curve has spent the past two years working its way back to a familiar shape. After the deep inversions of 2022–2024, the curve today slopes upward from end to end, a structure textbooks would call “normal.” But normal does not mean uneventful. The curve as of July 8, 2026, plotted below from Treasury quotes on the Charles Schwab fixed income platform, tells a story of a patient Federal Reserve, a remarkably flat belly, and a long end that is demanding to be paid.

U.S. Treasury offered yields, Charles Schwab / BondSource fixed income offerings, July 8, 2026.

The short end: anchored by a patient Fed

Bills and short coupons from three months to one year yield 3.80% to 4.17%, sitting just above the Federal Reserve’s current policy setting. At its June meeting, the first chaired by Kevin Warsh, the Federal Open Market Committee held the federal funds target range at 3.50%–3.75%, noting that economic activity is expanding at a solid pace while inflation remains elevated relative to the 2% goal, partly on energy-related supply shocks. The gentle upward tilt in the bill curve suggests markets see little urgency for cuts: short rates are priced to stay near current levels through the balance of the year, with the next read coming at the July 28–29 FOMC meeting.

The belly: remarkably flat

The most striking feature of today’s curve is how little compensation investors receive for extending from two years to five. The 2-year yields 4.22%, the 5-year just 4.34%, a spread of 12 basis points across three years of additional duration. This flatness is the market’s way of expressing equilibrium: policy is no longer restrictive enough to invert the curve, but expected rate cuts are too shallow to steepen it. For investors, the belly offers modest term premium and, in our view, argues against concentrating new purchases in the 3–5 year sector when better compensation is available further out.

The long end: term premium is back

From five years outward the curve steepens decisively: 4.57% at 10 years and 5.15% at 20 years, a slope of nearly 60 basis points. Long yields have been elevated all year; the 30-year touched its highest levels since before the financial crisis this spring; and the drivers are structural as much as cyclical. As Schwab’s mid-year fixed income outlook notes, fiscal concerns, rising global bond yields, elevated term premiums, and oil prices could keep upward pressure on long-term Treasury yields in the second half of 2026, and the term premium, while recovered from its 2020 lows, remains below its long-term average, leaving room to rise further. Investors are, at last, being paid real money to lend long.

The 20s/30s kink

One curiosity persists at the very long end: the 20-year yields 5.15% against 5.07% for the 30-year. This small inversion is a long-standing structural quirk; the 20-year point has traded cheap since its 2020 reintroduction, reflecting thinner demand relative to the benchmark 30-year bond rather than any macroeconomic signal. For total-return investors comfortable with duration, the 20-year sector remains one of the highest-yielding points on the government curve.

Positioning implications

The curve’s message is consistent with our house view. Cash yields near 4% remain attractive but are reinvestment-rate risk in disguise if the Fed’s next move is down. The flat belly offers little reward for intermediate duration. The steep back end with 20-year paper above 5% offers the best compensation on the curve for investors who can tolerate price volatility, though the same fiscal dynamics that created that yield argue for sizing positions with care.

Disclosures

This commentary is provided by Propulsion Capital Management for informational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any security. Yields shown are offered-side quotes from the Charles Schwab / BondSource fixed income platform as of July 8, 2026, are subject to change, and may differ from official Treasury constant-maturity rates. Past performance is not indicative of future results. Fixed income investments are subject to interest rate, credit, and inflation risk. Consult your financial advisor before investing.