Treasury Yields Settle at 4.39 on 10-Year as Curve Steepens Into May Jobs Print

The 10-year Treasury closed Friday at 4.39 percent, up 5 basis points on the week and the highest weekly close since March, as the bond market positioned for the May 8 jobs report. The 2-year settled at 3.88 percent, the 5-year at 3.92 percent, and the 30-year at 4.97 percent, marking the first time the long bond closed above 4.95 percent since November 2024. The 2s10s curve sits at plus 51 basis points after spending the first quarter inverted, the cleanest steepening signal the market has produced in this cycle. The shape of the curve is now consistent with a market that expects one or two Fed cuts in the back half of 2026 followed by a hold pattern through 2027.

The Fed funds rate has held at 3.50 to 3.75 percent since June 2025, the longest pause in the current easing cycle. Fed funds futures now price a 64 percent probability of a 25 basis point cut at the June 17 FOMC meeting, up from 51 percent two weeks ago. The probability has moved on weakening April retail sales data and softer ISM manufacturing readings rather than on inflation, which has stayed range-bound between 2.4 and 2.7 percent core PCE since January. The May 8 nonfarm payrolls print is the first major data release before the June meeting, and the consensus estimate sits at plus 145,000 jobs with the unemployment rate steady at 4.3 percent.

The yield curve steepening is being driven by long-end repricing rather than front-end rallies. Two-year yields have actually moved up 12 basis points since mid-April as the market scaled back near-term cut expectations. Ten-year yields have moved up 18 basis points and 30-year yields up 24 basis points in the same window, reflecting concerns about the sustained federal deficit, the May 22 funding extension price tag, and the supply calendar of Treasury issuance through the back half of the year. The Treasury announced a refunding mix this week that tilted slightly toward longer-dated issuance, which pressured 10s and 30s further.

Equity markets shrugged off the yield move and posted a strong week. The S&P 500 closed Friday at 7,230 and the Nasdaq Composite at 25,114, both new all-time highs. The Dow slipped slightly to 49,499 as defensive sectors lagged. April marked the strongest monthly gain for the S&P 500 since November 2020 at plus 10.4 percent, and the Nasdaq finished April up 15.3 percent on the back of strong tech earnings. Apple's fiscal Q2 print Thursday delivered $111.2 billion in revenue and $2.01 in EPS, beating consensus on both lines, with iPhone revenue up 21 percent and services revenue at a record $30.1 billion. Apple authorized a $100 billion buyback expansion that supported the broader tape into Friday's close.

The credit market told a calmer story than the rate market. Investment grade corporate spreads narrowed 4 basis points on the week to plus 87 over Treasuries, the tightest level since November 2024. High yield spreads tightened 12 basis points to plus 312, the tightest since the early 2022 cycle. New issue calendars were heavy on the IG side with $42.4 billion priced through Thursday, the busiest week since January. Issuers brought multi-tranche deals at attractive pricing because the spread tightening more than offset the higher absolute yields. Apple priced a $14 billion deal Tuesday in seven tranches at the tightest spreads of any 2026 issuance.

Banks were a meaningful beneficiary of the steeper curve. JPMorgan, Bank of America, Citigroup, and Wells Fargo all finished the week in the top quintile of S&P 500 performers. Net interest margin expectations have moved up across the regional and money center banks because the steeper curve allows banks to fund short and lend longer at improving spreads. Regional bank Q1 net interest margin beats came in 14 to 18 basis points above consensus across the 47 regional banks tracked by KBW, the largest aggregate beat in five quarters. The KBW Bank Index is up 6.4 percent year to date, outperforming the S&P 500 by roughly 200 basis points since the curve normalized in mid-March.

The week ahead has multiple market-moving releases. April nonfarm payrolls hit Friday May 8 at 8:30 a.m. Eastern. April ISM Services hits Monday May 4. Q1 unit labor costs and productivity hit Tuesday May 5. Multiple Fed speakers including Chair Powell, Vice Chair Jefferson, and New York Fed President Williams have appearances scheduled before the June 17 FOMC pre-meeting blackout window opens June 7. The earnings calendar includes Palantir, AMD, and Arm on Tuesday, McDonald's and Disney Wednesday, and Coinbase Thursday, all of which carry index-level implications.

For investors positioned in fixed income, the steeper curve creates the first attractive coupon environment in two years for laddered bond strategies. A 10-rung Treasury ladder built from 1-year through 10-year maturities now yields a blended 4.04 percent, up from 3.85 percent in March. Investment grade corporates extend that to 4.81 percent at A and BBB. The duration risk on the long end has moved up with the steepening, so ladders weighted toward 2-year through 7-year exposures have the better risk-reward profile through the next 90 days. Cash and money market funds at 4.20 to 4.40 percent still beat short-term bonds for emergency reserves, but the rotation case for ladders is the strongest it has been in this cycle.