TREASURIES-US yields tick higher in final week of 2025

By Matt Tracy

Dec 30 (Reuters) - Treasury yields were largely unchanged at midday on Tuesday, as the market looked ahead to January for signs of the U.S. economy's direction.

The yield on 10-year Treasury notes US10YT=RR ticked up 1.2 basis points to 4.127%.

The yield on the 30-year Treasury bond US30YT=RR was last up 0.4 bps at 4.808%.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was last down one bp at 3.454%.

The U.S. dollar five-year forward inflation-linked swap USIL5YF5Y=R, seen by some as a better gauge of inflation expectations due to possible distortions caused by the Fed's quantitative easing, was last at 2.449%.

Yields ticked higher after Tuesday data showed that home prices in October rose at the slowest annual rate in more than 13 years.

Data on Monday showed pending home sales rose 3.3% last month after an upwardly revised 2.4% gain in October, the National Association of Realtors said. Economists polled by Reuters had forecast contracts rising 1%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=RR, seen as an indicator of economic expectations, was at 67 bps.

Market odds of a cut in a key interest rate at the Federal Reserve's January meeting were last at 16.1%.

The Fed released minutes from its last December FOMC meeting midday on Tuesday.

Market participants are watching closely for any key data points that could point to a rate cut in January. This will likely come in the first month of 2026 with the next major inflation and jobs reports, market participants said.

"There has not been a lame-duck midterm year (like 2026) since 1950 in which sustained monetary tightening coincided with a favorable market outcome," said Dean Lyulkin, CEO of small business lender Cardiff and founder of The Dean's List, in a written note.