Forecasting U.S. 10-Year Treasury Yields

Navigating Economic Signals for the Year Ahead

Doug Crescenzi

27 May 2025 — 6 min read

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TL;DR:

10-year Treasury yields are on the rise with a 45% chance of reaching 5.0% in 2025
US recession in 2025 holds a 37% probability, indicating moderate economic uncertainty.
Bitcoin price may hit $150,000 by year-end with a 44% chance, showing a potential correlation with rising Treasury yields.
Long-tail "Trump exits Russia x Ukraine negotiations before July?" market stands at 24%, suggesting early diplomatic shift signals with $20,000 in volume.

Market Snapshots

Event Breakdown

Forecasting the UST 10Y Market: This week, we dive into the UST 10-year Treasury yield markets, a critical barometer of economic sentiment, fiscal policy, and global financial dynamics. Polymarket data across multiple markets offers a window into the likelihood of Treasury yields rising or falling in 2025, with significant trading volume underscoring their importance. Three key market sets are in focus: "How high will 10-year Treasury yield go in 2025?" (4.6%, 4.8%, 5.0%, 5.2%, 5.5%, 5.7%, 6.0%), with nearly $700,000 in volume; "How low will 10-year Treasury yield get in 2025?" (1.0%, 2.0%, 3.0%, 3.5%, 4.0%), with nearly $400,000 in volume; and a short-term binary market, "US 10Y Treasury yield above 5% by June 30?" with nearly $950,000 in volume. These markets collectively signal market expectations for economic growth, inflation, and monetary policy shifts, with profound implications for the U.S. economy, political landscape, and global markets.

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Starting with the upper bounds, the "How high will 10-year Treasury yield go in 2025?" markets show a strong tilt toward elevated yields. As of May 26, the probability of yields reaching 4.6% stands at 79.5%, with 4.8% at 61.5%, 5.0% at 44.5%, 5.2% at 33.5%, 5.5% at 20.0%, 5.7% at 14.1%, and 6.0% at 10.0%. This distribution suggests markets are pricing in a notable chance of yields climbing above current levels.

Conversely, the "How low will 10-year Treasury yield get in 2025?" markets lean toward resilience, with probabilities of 4.0% at 65.5%, 3.5% at 17.5%, 3.0% at 10.0%, 2.0% at 5.5%, and 1.0% at 3.8%. The skew indicates a low likelihood of yields dropping significantly..

The short-term market, "US 10Y Treasury yield above 5% by June 30?" at 14.5%, suggests near-term caution but doesn’t rule out a mid-year spike if economic data surprises to the upside.

The real-world implications of these yield movements are far-reaching. Rising Treasury yields, as favored by the "high" markets, signal expectations of stronger economic growth or higher inflation, which could prompt the Federal Reserve to tighten monetary policy further. For the U.S. economy, this means higher borrowing costs for businesses and consumers, potentially slowing investment and spending. Politically, elevated yields exacerbate the U.S. debt burden—with a national debt exceeding $36 trillion, a jump to 5% yields could add billions to annual interest payments, fueling debates over deficits and fiscal policy.

On the flip side, a drop in yields—as less favored by the "low" markets—would signal economic weakness or deflationary risks, potentially triggering a dovish Fed response with rate cuts. This could ease borrowing costs but might also stoke fears of a recession.

Speaking of which, the "US recession in 2025?" market at 37.5% shows a moderate probability, down from earlier peaks, suggesting that while recession fears persist, they’re not the dominant narrative. Lower yields could provide fiscal relief on U.S. debt servicing but might also reflect diminished growth prospects, impacting tax revenues and widening deficits—key concerns for policymakers navigating a politically charged environment.

Geopolitically, Treasury yield movements ripple across global markets. This dynamic could complicate U.S. foreign policy, especially if trade deals with nations like India or Vietnam are undermined by a stronger dollar.

An intriguing relationship emerges with Bitcoin markets. The "What price will Bitcoin hit in 2025?" markets show probabilities of $150,000 at 43.5%, $130,000 at 70.5%, and $120,000 at 82.5%, with a clear upward trend as Treasury yield expectations rise.

This relationship suggests that as yields increase—potentially reflecting inflation or growth—Bitcoin is seen as a hedge, driving its price higher. Macro traders can use this insight to position across asset classes, balancing Treasury exposure with crypto allocations to hedge inflationary risks.

For macro traders, policymakers, and journalists, these markets offer a predictive lens into economic trajectories. Traders can anticipate yield-driven market shifts, adjusting portfolios for interest rate sensitivity—higher yields might favor financials but pressure growth stocks. Policymakers can gauge market expectations for inflation and growth, informing decisions on fiscal stimulus or debt management. Journalists, meanwhile, can use these probabilities to frame narratives around economic policy, offering readers a data-driven perspective on fiscal debates.

The value of prediction markets lies in their ability to aggregate diverse signals into actionable probabilities. Unlike traditional forecasts, these markets reflect real-time trader sentiment, providing a dynamic view of economic affairs. For those looking to trade the future, tracking these markets on Polymarket offers a direct line to market expectations—whether it’s betting on yield thresholds, recession odds, or Bitcoin’s response to economic shifts. As news unfolds, from Fed announcements to geopolitical developments, these probabilities will evolve, offering a real-time pulse on the U.S. economy and its global impact.

Related markets & forecasts:

Long-Tail Radar

This week’s Long-tail Radar zeroes in on a compelling long-tail market on Polymarket: "Trump exits Russia x Ukraine negotiations before July?" with nearly $20,000 in volume. This market, tracking a potential diplomatic shift, offers a unique early signal for traders and forecasters navigating geopolitical and economic landscapes. As of May 27, the probability stands at 24.0%, up from a low of around 15% earlier this month, reflecting growing trader interest amid evolving U.S. foreign policy discussions. The attached visualization highlights this upward trend since the market’s inception, underscoring its volatility and potential as a leading indicator.

What makes this market intriguing is its connection to broader geopolitical and economic narratives. A Trump exit from Russia-Ukraine talks could signal a pivot in U.S. diplomatic strategy, potentially impacting related markets like "EU/NATO country announces peacekeeping force in Ukraine?" (11% probability) or "Russia x Ukraine ceasefire before July?" (10%). A higher likelihood of withdrawal might reduce the odds of U.S. peacekeeping involvement, shifting the burden to European allies and altering global security dynamics. For traders, this could foreshadow volatility in energy markets, given Ukraine’s role in European gas transit, or currency fluctuations if sanctions tighten.

Economically, this market ties into U.S. fiscal and debt considerations. An exit might escalate tensions, prompting increased defense spending—already a concern with the U.S. debt exceeding $36 trillion. This could pressure Treasury yields, as seen in the "US 10Y Treasury yield above 5% by June 30?" market (15% probability), where higher yields might reflect inflationary risks from geopolitical instability.

The approximate $20,000 volume, modest but significant for a long-tail market, suggests niche but focused trader engagement, making it a bellwether for early trends. As news breaks—whether from Trump’s policy statements or international summits—this market’s movements could ripple into higher-liquidity markets, offering a strategic edge. Tracking it on Polymarket provides a real-time pulse on diplomatic shifts, empowering traders to adjust positions and policymakers to gauge public sentiment ahead of broader market reactions.

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