Yield Curve Signals Late Cycle
From the Trading Desk at Stipelis
The Strategy Session-Futures, Sectors and Tactical Market Insights.
October 30, 2025
Treasury yields tell a powerful story. Since June 2024, the average yield across maturities has dropped from 4.95% to 3.9492—a 20.4% decline. This reflects a major shift from restrictive policy toward easing, as the Fed cut rates twice in 2025 and signaled caution ahead.
Yesterday’s 25 bp cut wasn’t the headline—it was Powell’s tone. His statement that December’s decision is “not a foregone conclusion” triggered a sharp selloff in U.S. Treasuries. The 10-year yield climbed to 4.055%, and the 2-year hit 3.578%. Traders are recalibrating expectations, pricing in a more cautious Fed.
This yield spike supported the U.S. dollar, which strengthened across major currencies. The WSJ Dollar Index rose 0.5%, with notable gains against the yen (+1%) and euro (+0.5%). Analysts attribute this to Powell’s hawkish tone and optimism around U.S.-China trade, though separating trade effects from monetary signals remains tricky.
Despite Trump’s announcement of lowered tariffs on China, FX markets stayed subdued. MUFG expects another cut in December, contingent on labor market weakness and resolution of the government shutdown, which has delayed key data.
Oil markets reversed earlier gains. Brent fell 0.9% to $64.35, and WTI dropped 0.8% to $59.98. While inventory drawdowns had lifted prices, skepticism about the U.S.-China deal and expected supply increases from OPEC+ weigh on crude. The November 2 meeting could result in modest output hikes, potentially driving a third straight monthly decline in oil prices.
Bottom line: The bond market is signaling late-cycle dynamics. Lower yields since mid-2024, combined with Powell’s cautious tone, point to tactical opportunities in rates and FX. Energy markets remain volatile, with supply-side risks dominating.
Stephen Coleman
Head Market Strategist and Founder