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Treasuries: ISM Price Surge Sparks Stagflation Fear

The ISM Manufacturing Prices Paid index surged to 70.5 in February 2026, smashing the consensus estimate of 58.2 and marking the highest input-cost reading in months. The magnitude of the surprise — more than 12 points above expectations — sent a clear signal: factory-gate inflation is reaccelerating even as the broader economy shows signs of cooling. This divergence matters for Treasury investors because it arrives alongside a sharply weaker employment outlook. Non-Farm Payrolls estimates for March 6 have dropped to just 70,000, half the prior reading of 130,000. Rising input costs paired with weakening job creation is the textbook definition of stagflation — the worst-case scenario for central bank policymakers who must choose between fighting inflation and supporting growth. The 10-year Treasury yield has drifted down to 4.02% as of late February, retreating from 4.18% earlier in the month. But the ISM data complicates the bond rally narrative. If inflation pressures are building at the producer level, they will eventually pass through to consumer prices — potentially stalling the Federal Reserve's rate-cutting cycle just as the labor market softens. The next two weeks of data releases (NFP March 6, CPI March 11, GDP/Core PCE March 13, and the FOMC meeting March 18) will determine whether this stagflation signal is a one-off anomaly or the start of something more concerning.

ISM Manufacturing PricesstagflationTreasury yields

Treasuries: Rally Accelerates as 10-Year Yield Breaks Below

The U.S. Treasury market is experiencing its most sustained rally since late 2025, with the benchmark 10-year yield falling to 4.03% on February 23 — its lowest level in nearly three months and a sharp decline from the 4.29% levels seen at the start of the month. The move has been driven by a confluence of softening economic data, renewed tariff uncertainty, and a broad flight to safety that has seen investors rotate out of risk assets and into government bonds. The rally has been particularly pronounced across the long end of the curve. The 30-year Treasury yield has retreated from 4.91% in early February to 4.70%, while the 2-year note — more sensitive to Federal Reserve policy expectations — has drifted lower to 3.43% from 3.57%, reflecting growing market conviction that the Fed's easing cycle still has room to run. Mortgage rates have followed Treasury yields lower, with the 30-year fixed rate dipping below 6% for the first time since 2022, a development that could reinvigorate the housing market heading into spring. The backdrop is one of rising macroeconomic anxiety. JPMorgan CEO Jamie Dimon warned investors this week that elevated asset prices are adding to economic risks, drawing uncomfortable parallels to the pre-2008 era. With the effective federal funds rate at 3.64% — reflecting 169 basis points of cumulative cuts since the September 2024 peak of 5.33% — the market is now pricing in a careful balance between lingering inflation concerns and mounting evidence of economic deceleration.

US Treasury yields10-year TreasuryFederal Reserve rate cuts

Treasuries: The Yield Curve Has Normalized After Two Years

After spending more than two years inverted — the longest stretch in modern history — the US Treasury yield curve has decisively normalized. The <a href="/posts/2026-02-25/treasuries-rally-accelerates-as-10-year-yield-breaks-below-405-on-growth-fears-and-flight-to-safety">10-year Treasury</a> yield stood at 4.02% on February 26, 2026, while the 2-year note yielded 3.42%, producing a positive spread of 60 basis points. That gap has narrowed from 74 basis points earlier in the month, but the broader story remains: the curve is no longer flashing the recession warning that dominated bond market commentary from mid-2022 through most of 2025. The normalization has been driven by the Federal Reserve's rate-cutting campaign. After holding the federal funds rate at 4.33% for five consecutive months through July 2025, the Fed began easing in the autumn, bringing the rate down to 3.64% by January 2026 — a cumulative 69 basis points of cuts. Short-term Treasury yields have followed the policy rate lower, while long-term yields have declined more gradually, reflecting persistent fiscal concerns and inflation expectations that remain above the Fed's 2% target. For bond investors, this represents a meaningful shift in the opportunity set. The days of earning higher yields on short-term bills than long-term bonds are over. The question now is whether the normalization signals that the recession the inverted curve was supposedly predicting has been avoided entirely — or is merely delayed.

treasury yieldsyield curvefederal reserve rate cuts

Treasuries: Tariff Turmoil Sends Investors Rushing to Bonds

The US Treasury market is digesting one of the most consequential trade policy shifts in decades. After the Supreme Court struck down President Trump's reciprocal tariff regime on February 20, 2026, bond yields initially dipped as markets processed the implications of reduced trade barriers — only for Trump to announce plans to raise global tariffs to 15%, reigniting uncertainty. The <a href="/posts/2026-02-25/treasuries-rally-accelerates-as-10-year-yield-breaks-below-405-on-growth-fears-and-flight-to-safety">10-year Treasury</a> yield sits at 4.08% as of February 19, having fallen more than 20 basis points from its early-February high of 4.29%. The whiplash in trade policy has created a fascinating push-pull dynamic in the bond market. On one hand, the court ruling removes a significant inflationary impulse from reciprocal tariffs, which should be bond-friendly. On the other, Trump's defiant response threatens to reimpose price pressures through a different mechanism. Meanwhile, the Federal Reserve has already cut the federal funds rate to 3.64% in January 2026 — its fourth consecutive reduction — and investors are watching closely to see whether the tariff chaos delays or accelerates the next move. Across the curve, yields have declined sharply from their February peaks. The 2-year note at 3.47%, the 10-year at 4.08%, and the 30-year bond at 4.70% all reflect a market that is pricing in slower growth, moderating inflation expectations, and continued monetary easing — even as fiscal and trade policy remain deeply uncertain.

US Treasury bondsTreasury yieldsSupreme Court tariffs