2023 was a momentous year for Treasury yields as the Federal Reserve continued its aggressive hiking campaign and investors fretted over high inflation and a potential recession.

The yield on the 10-year note passed 5% in October for the first time since 2007, before dropping below 4% in late November on bets of an end to rate increases and cuts in the new year.

In December 2023, the Federal Reserve signaled they may begin cutting interest rates in 2024. An inverted yield curve occurs when longer-term bond yields are below those of short-term bonds. It’s an unusual but not unprecedented occurrence, as investors typically expect to earn higher yields on longer-term bond investments. In addition, some consider an inverted yield curve to be a harbinger of recession. But so far, the U.S. economy continues to exhibit moderate growth with no immediate signs of a recession. We now see 10-year US Treasury yields averaging just over 4% over the long term.