Long-term U.S. Treasury yields are expected to stay elevated despite anticipated Federal Reserve rate cuts, according to a Reuters poll of 75 bond strategists conducted from October 9–13. Sticky inflation, rising deficits, and concerns over Fed independence are limiting the decline in long-term yields, even as short-dated Treasuries are projected to edge lower.

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Inflation and Debt Pressures Weigh on Long Yields

Persistently high long-term yields threaten to exacerbate Washington’s rapidly deteriorating fiscal position. Non-partisan analysts estimate that President Trump’s aggressive tax and spending reforms could add more than $3 trillion to the national debt over the next decade, further pressuring the bond market.

With growth remaining strong and inflation well above the Fed’s 2% target, many market strategists argue that current policy is not restrictive enough to justify the five rate cuts currently priced into futures through 2026. Analysts caution that easing too aggressively or too soon could reignite price pressures and push yields higher even as the labor market softens.

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Treasury Yield Forecasts

According to the Reuters poll:

• The 10-year U.S. Treasury yield, currently around 4.0%, is expected to trade at 4.10% in three to six months and rise to 4.17% within a year.
• Shorter-term 2-year yields are forecast to hold near 3.47% by year-end, falling slightly to 3.35% in a year, reflecting modest expectations for Fed rate cuts.

Collin Martin, fixed income strategist at Schwab Center for Financial Research, said:

“We don’t expect long-term yields to fall much further, if at all. Ten-year Treasuries can still hold above 4% even as the Fed cuts rates, mainly due to sticky inflation and the overall resilient economy.”

Poll results indicate that 61% of analysts believe 10-year yields are more likely to exceed current forecasts than fall below them by year-end.

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Steepening Yield Curve

The divergence between short-term and long-term yields is expected to steepen the U.S. Treasury yield curve:

• The spread between 10-year and 2-year yields is projected to rise from 50 basis points currently to 60 bps by year-end and reach 82 bps in a year, the highest since January 2022.
• The term premium, which compensates investors for holding longer-term debt, has remained elevated in 2025, reaching an 11-year high in July.

Vincent Reinhart, former Fed staffer and chief economist at BNY Mellon Asset Management, noted:

“The yield curve steepens as the Fed keeps short-term rates low and investors demand more inflation compensation, resulting in higher volatility and a higher term premium.”

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Impact of Government Shutdown and Policy Uncertainty

The ongoing U.S. government shutdown has complicated policy decisions, halting key economic data releases and leaving the Fed to navigate monetary policy with limited visibility. Analysts warn that this increases the risk of policy missteps, especially as doubts over the Fed’s independence persist.

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Implications for Investors

For investors, the persistent elevation of long-term Treasury yields has several consequences:

• Higher borrowing costs for corporations and consumers
• Stronger inflation expectations embedded in bond markets
• Potential adjustments in portfolio allocation toward shorter-duration bonds
• Increased attention to fiscal policy and deficit management

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Conclusion

While the Federal Reserve may lower short-term rates in the coming months, long-term yields are likely to remain elevated due to inflation, debt pressures, and policy uncertainty. The resulting steepening of the yield curve underscores the importance of monitoring inflation trends, fiscal policy, and market expectations for investors and policymakers alike.