Back in September 2025, the Fed started cutting rates, and the market was hoping the easing cycle would continue and bring the 10-year Treasury yield down toward the 3.8% range. Borrowers naturally took a wait and see approach, hoping they could eventually finance at a lower rate.
I have been a notorious bear on U.S. Treasuries since I joined the real estate industry in June 2025, not exactly a great charm, though. I have consistently called for the 10-year to march north and for the yield curve to bear steepen.
Looking back over the past year, I have seen sponsors lock their rates and successfully close deals even as the 10-year Treasury moved 30-40 basis points higher. I have also seen a sponsor lock the rate when the bond market sentiment was bullish and the 10-year treasury yield was traded at 4%. Today, the 10-year Treasury is trading at 4.8%. Looking back, waiting for a lower rate would have been a painful decision.
Source: CME
Now the Fed's September 16 meeting is around the corner. The market is currently leaning toward a 25 basis point hike, with a 60% probability priced in.
I think the Fed may keep rates unchanged and gather a few more signals before making its next move. Inflation is definitely a concern, but it is not out of control. Geopolitical tensions are adding another layer of uncertainty.
The Fed does not necessarily need to slam on the brakes every time it sees an iceberg. Sometimes, it can simply slow down, watch the water, and let things drift before deciding what to do next. The Fed needs to see a trend that it can no longer ignore before making a move.
Source: BLS
If the Fed does not hike in September, I would expect some downward correction in the 10-year Treasury yield, but a limited one. I would still be disciplined about locking the rate if I were the borrower, as the fundamental story has not really changed. Inflation is still above the Fed's target, the carry trade unwind story is still hanging around, and the market still has to digest a very large amount of government borrowing. So yes, I could be wrong this time. So far, though, the data has been on my side.
