The Treasury market in 2025 had its best year since 2020 as US trade policy shifts curtailed economic activity and the Federal Reserve cut interest rates in response to weakening labor-market conditions.

At the same time, Treasury yields remained confined to ranges in place roughly since the end of the Fed's historic 2022-2023 tightening cycle. The 10-year, for example, ranged from 3.86% to 4.81%, its narrowest band since 2021.

Yield declines were biggest for short maturities, and the 30-year increased slightly, amid expectations at year-end that the Fed was likely to cut rates further in 2026.

During the year, in which US President Donald Trump took office in January, the Treasury market drew support from economic uncertainty created by the turbulent roll-out of tariffs, broadly mounting expectations for Fed rate cuts, and a record six-week government shutdown that curbed growth.

Meanwhile, yields faced upward pressure from the dire long-term fiscal outlook, predictions that tariffs would cause inflation, and indications of accommodative financial conditions including record highs for US stock-market benchmarks and robust corporate bond issuance.

The Trump administration's drive to change the leadership of the Fed in pursuit of lower interest rates drove short-term Treasury yields lower and long-term ones higher, reflecting concern about unwarranted rate cuts keeping upward pressure on inflation.

For 2026, most Wall Street interest-rate strategists expect stable-to-higher Treasury yields as the Fed's rate-cutting cycle comes to an end. 

• The Bloomberg US Treasury Index returned 6.3%; the best months for the index were February (2.2%) and June (1.3%); the worst was May (-1%), one of three losses
• 2025 changes for benchmark yields: 2 year, -77 basis points; 5Y, -66bp; 10-year, -40bp; and 30-year +6.2bp
• Until October — when two- and five-year yields reached their lowest levels of the year amid a selloff in regional bank shares that stoked concerns about loan impairment — the year's lowest Treasury yields were reached following the tariffs roll-out on April 2, which was seen as a threat to economic growth and briefly tanked the stock market
• During the second half of the year, slowing job growth — which economists attributed to tariff-related uncertainty and Trump's federal workforce reduction — drove expectations for the Fed's three rate cuts, in September, October and December
• At the start of the year, at least three Wall Street banks — Bank of America, BNP Paribas and Deutsche Bank — forecast no Fed action in 2025; as late as July, several forecast a single 2025 cut in December
• Citigroup was consistently the most optimistic on rate cuts, looking through April for reductions totaling 125bp, and by June predicting the eventual outcome
• Treasuries also benefited from fading expectations for note and bond auction size growth as accumulating tariff revenue caused an unexpected slight narrowing of the federal deficit
• Early in the year, many forecasters expected bigger auctions in early 2026, and several had forecasts for increases during the second half of 2025; by November the consensus had shifted to late-2026, early-2027
• Still, the long-term fiscal outlook remained bleak, and 30-year yields reached their highest level of the year, exceeding 5%, when Moody's Ratings on May 16 stripped the US of the highest credit score, several years after other debt rating agencies took the same action
• Yields also faced upward pressure during the year from predictions that tariffs would cause inflation, which mostly failed to pan out; meanwhile, a capital spending boom by US technology giants helped drive economic growth and contributed to near-record levels of corporate borrowing that competed with Treasuries for investor cash
• The administration's drive to re-constitute the Fed included Trump's statements even before being elected in 2024 that he wouldn't reappoint Jerome Powell, whose term as Fed chair ends in May 2026; at various points during the year, Trump said he wanted Powell to resign, but wouldn't fire him; at year-end it remained unclear whom Trump would nominate to succeed Powell, among contenders including National Economic Council head Kevin Hassett, former Governor Kevin Warsh and Governor Christopher Waller
• Fed Governor Adriana Kugler resigned in August, allowing Trump to install Stephen Miran to complete her term, after an investigation uncovered stock trades that violated Fed ethics rules
• Also in August, Trump attempted to fire Fed Governor Lisa Cook based on unproven mortgage fraud allegations; she remained in office with a legal challenge to the firing pending
• The Fed's rate decisions from July onward drew dissents from one or more of Trump's appointees in favor of cutting rates or cutting them by a larger amount
• The US government shutdown from Oct. 1 to Nov. 12 delayed the production of most economic data, including employment and consumer prices, which help drive Fed decision-making
• The Bureau of Labor Statistics Nov. 21 said it wouldn't produce its October consumer price index report because data couldn't be collected retroactively; the lapse caused inflation-protected Treasury securities and US inflation derivatives to employ fallback mechanisms for the first time.