Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or to subscribe for the latest trends and forecasts from our highly experienced Kiplinger Letter team.
The 10-year Treasury note’s yield will remain in a narrow range for now. Concerns about soaring government deficits and inflation provoked by tariffs, which tend to push bond yields up, are being balanced by worries about a slowing economy, which tend to push yields down. The 10-year Treasury is often used as a benchmark for mortgage and auto loan rates.
The yield curve will become upward-sloping sometime next year. The bond market is still concerned that there will be an economic slowdown, as shown by the fact that current one- to seven-year Treasury notes have lower yields than short-term Treasury bills, which mature in a few months. But 20- and 30-year bond rates have picked up more than the 10-year rate in recent months, indicating that both long-term inflation and government deficits are a rising concern among bond investors. The result is a U-shaped yield curve currently, with higher short and long yields than medium-term ones. As the uncertainties of tariff policy gradually get resolved, fears of a recession will diminish, and medium-term rates are likely to pick up. The long end of the yield curve is likely to stay elevated, however. We expect short rates to fall next year, so the yield curve by the end of 2026 is likely to be consistently upward-sloping along its entire length, for the first time since 2021.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Federal Reserve is not likely to cut short-term rates until closer to the end of 2025. Fed Chair Jerome Powell has emphasized that the Fed won’t cut rates until it has a better understanding of how higher tariffs affect consumers’ longer-term inflation expectations. Because price effects from tariffs take time to work through the supply chain to the consumer, that clarity will not come soon. Even though tariffs have had only a small impact on inflation so far, Powell has noted that all professional forecasters expect them to boost inflation this year, at least temporarily. Because of the danger that these price increases could affect longer-term inflation expectations, he feels that it is necessary to maintain a moderately restrictive monetary policy for now. The Fed’s next meeting is July 29-30.
Mortgage rates won’t be changing much. 30-year fixed-rate mortgages are around 6.7%, having changed little during the past nine months. 15-year loans are at 5.9% for borrowers with good credit. If the economy weakens, then rates should ease a bit. Mortgage rates are still higher than normal, relative to Treasuries, but whenever the Fed cuts short-term rates again, that will boost banks’ lending margins, which should eventually lower mortgage rates a bit, too.
Top-rated corporate bond yields have also been treading water, along with Treasury yields. AAA-rated long-term corporate bonds are yielding 4.9%, BBB-rated bonds are at 5.3%, and CCC-rated bonds have eased to 12.5% from their 15.2% peak in April on reduced recession fears.
Related Content
-
Don’t Miss Apple and Walmart Back-to-School Tax-Free Holiday Savings this SummerSales Tax Select states host sales tax holidays during the summer; here’s what you can purchase.
-
The Rule of Retirement InversionThe rule of retirement inversion says that to have a great retirement, you must ask yourself what would ruin a great retirement — and then plan to avoid it.
-
The Five Best Side Hustles for RetireesMore older people are working in retirement to boost income and stave off boredom. These gigs and hustles make the most sense for the golden years crowd.
-
TSA’s New Family Lanes Aim to Take the Stress Out of Summer TravelThe “Families on the Fly” campaign introduces family-friendly security lanes and discounted TSA PreCheck fees — just in time for peak travel season.
-
How Divorced Retirees Can Maximize Their Social Security Benefits: A Case StudySusan discovered several years after she filed for Social Security that she is eligible to receive benefits based on her ex-spouse's earnings record. This case study explains how her new benefits are calculated and what her steps are to claim some of the money she missed.
-
From Piggy Banks to Portfolios: A Financial Planner's Guide to Talking to Your Kids About Money at Every AgeFrom toddlers to young adults, all kids can benefit from open conversations with their parents about spending and saving. Here's what to talk about — and when.
-
I'm an Investment Pro: Here's How Alternatives Could Inject Stability and Growth Into Your PortfolioAlternative investments can often avoid the impact of volatility, counterbalancing the ups and downs of stocks and bonds during times of market stress.
-
Retirement in the Age of Cyber Scams: How To Protect Your Next ChapterRetirement is meant to be a time of relaxation and living life on your terms. But for many retirees, this dream is under threat from a growing epidemic — cyber scams.
-
Dow Bleeds Red Due to Big Blue: Stock Market TodaySix of the official GICS sectors were in the green, led by communications services, technology and energy stocks.
-
July Fed Meeting: Live Updates and CommentaryThe July Fed meeting could be a lively economic event, with Wall Street keyed into what Fed Chair Powell has to say about interest rates and President Trump.
