Fed Funds Rate vs 10-Year Treasury Yield
The federal funds rate is the Fed's lever on short-term interest rates; the 10-year Treasury yield is set by the bond market. Comparing them shows the market's read on Fed policy.
FEDFUNDSDGS10- Fed Funds Rate
- 10-Year Yield
The Federal Reserve directly controls the overnight federal funds rate. It does not directly control long-term rates — those are set by investors trading Treasuries. The gap between the two reflects market expectations: the 10-year yield roughly averages expected overnight rates over the next decade, plus a term premium.
When the Fed hikes aggressively into a slowing economy, fed funds can exceed the 10-year yield — the classic front-of-the-curve inversion. That happened in 2006–07, in 2000, and again starting in 2022. When the Fed is stimulating, fed funds sit well below the 10-year, as they did throughout the 2010s.
Bond investors watching this comparison get a quick read on whether the market thinks the Fed is tight (fed funds above 10-year) or easy (fed funds well below). The difference is a meaningful input to risk-asset pricing: credit spreads, equity multiples, and mortgage rates all key off this relationship.
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