Treasury Yield Curve & Policy Battle Simulator

US Treasury Benchmark Yield Curve (3M - 30Y)

Blue = Active Model | Slate = Baseline (4.50% Front)

10-Year Benchmark

4.42%

Spread to 2Y: +14 bps

30-Year Fixed Mortgage

6.82%

Spread to 10Y: +240 bps

BBB Corp Spread (10Y)

5.77%

Spread: +135 bps

Federal Debt Service

$1.14T

Rollover risk: High

Market Battle Dynamics: Heavy front-end T-bill issuance suppresses 10Y yields by reducing duration supply, but elevates refinancing vulnerability if Fed policy rate stays sticky.

Issuance Mix & Bond Market Mechanics

T-Bill Issuance Ratio (Short Duration) 35%

Standard Treasury recommendation is ~20%. Skewing up to 35-40% cuts duration supply pressure on 10Y/30Y.

Bond Vigilante Term Premium Bias +45 bps

Investors demanding compensation for holding long-dated federal paper against fiscal deficit uncertainty.

Fed Neutral Policy Rate Expected 4.50%

Underlying terminal Fed funds expectation anchoring the short end (3M - 2Y).

Deficit-to-GDP Trajectory 6.2%

Expansionary deficits increase aggregate debt issuance requirements ($1.8T+ annual auctions).

10-Year Yield Force Decomposition

Rate Expectation: 2.45%

Inflation Expectation: 1.40%

Term Premium: +0.45%

Duration Supply: +0.12%

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