The Fed November 5 Dilemma
Yields are screaming. As of this morning, November 5, 2025, the 10-year Treasury yield sits at a staggering 4.38 percent. This is not the stability investors were promised eighteen months ago. While the consensus in early 2024 suggested a glide path toward 3 percent, the reality of late 2025 is a brutal bear steepening of the curve. The Federal Open Market Committee (FOMC) begins its two day policy meeting today; and the market is pricing in a 72 percent probability of a 25 basis point cut, yet long-term rates refuse to budge. The disconnect between policy rates and market yields has reached a breaking point. Institutional desks are no longer trading on Fed rhetoric alone. They are trading on the sheer volume of issuance required to fund a 1.8 trillion dollar deficit.
Dissecting the Term Premium Revival
For a decade, the term premium was a ghost. Now, it is the primary driver of fixed income volatility. Per the latest Bloomberg bond market data, the premium investors demand for holding long-dated debt over rolling over short-term bills has turned positive for the first time in this cycle. This is a fundamental shift in the mechanics of the bond market. It signals a loss of confidence in the long-term inflation target. We are seeing a transition from a ‘disinflationary’ mindset to a ‘structural inflation’ reality where 3 percent is the new 2 percent. The October CPI print, which landed at 3.1 percent last week, confirmed that the ‘last mile’ of inflation control is more like a marathon. The 2-year Treasury is currently hovering at 4.12 percent, creating a spread that suggests the market is finally un-inverting; but for all the wrong reasons.
The Technical Breakdown of Treasury Volatility
Bond volatility, measured by the MOVE Index, spiked to 125 yesterday. This level of turbulence is typically reserved for banking crises or global conflicts. The catalyst is the Treasury Department’s quarterly refunding announcement. Last week, the Treasury confirmed it would auction 125 billion dollars in notes and bonds this quarter. The market’s inability to digest this supply without a significant yield concession is the ‘canary in the coal mine’ for fiscal sustainability. When the 10-year yield breached the 4.35 percent resistance level on November 3, it triggered a wave of programmatic selling that we are still feeling today.
Comparison of Yield Metrics November 2024 vs November 2025
To understand the current carnage, we must look at where we stood exactly one year ago. The following table highlights the shift from a Fed-dependent market to a supply-driven market.
| Security Type | Nov 05, 2024 Yield | Nov 05, 2025 Yield | Basis Point Change |
|---|---|---|---|
| 2-Year Treasury | 4.72% | 4.12% | -60 bps |
| 10-Year Treasury | 4.28% | 4.38% | +10 bps |
| 30-Year Treasury | 4.41% | 4.55% | +14 bps |
| MOVE Index (Volatility) | 108 | 125 | +17 pts |
The 2-year yield has fallen as the Fed pivoted, but the 10-year and 30-year yields have climbed. This is the definition of a ‘bear steepener.’ It suggests that while the Fed is trying to ease the front end, the market is pricing in long-term fiscal profligacy and higher inflation expectations. Investors who bought the ‘safety’ of the 10-year in late 2024 are currently sitting on principal losses despite the Fed’s rate-cutting cycle starting in September 2025.
The Duration Trap and the 4.5 Percent Threshold
The technical mechanism of the current bond rout is the duration trap. Passive bond ETFs, such as the iShares 20+ Year Treasury Bond ETF (TLT), have seen record outflows this week. As yields rise, the price of these long-duration assets falls exponentially. Retail investors who treated Treasuries as a high-yield savings account alternative are discovering the ‘price risk’ inherent in government debt. According to Reuters market analysis, the liquidation of long-duration positions is accelerating as the 10-year yield approaches the psychological 4.5 percent threshold. If that level breaks before the end of the year, we could see a disorderly repricing of all risk assets, including equities and real estate.
Foreign Appetite and the USD Dominance
Another factor often ignored is the waning appetite from overseas central banks. Data from the Treasury Department’s recent auction results shows that indirect bidders—a proxy for foreign central banks—accounted for only 58 percent of the last 10-year auction, down from a 65 percent average in early 2025. As Japan struggles with its own yield curve control exit and China continues to trim its US holdings, the domestic market is being forced to absorb more paper. This lack of foreign ‘price-insensitive’ buyers means that yields must stay high to attract private capital. The safety of the Treasury is no longer a given; it is a commodity that must be priced competitively against a global backdrop of rising rates.
The next critical juncture arrives on January 15, 2026, when the current debt ceiling suspension expires. Markets are already eyeing this date with extreme caution. The specific data point to watch is the 3-month Treasury bill yield relative to the 10-year; if the 3-month yield remains significantly above the 10-year as we enter the first quarter of 2026, the recessionary signal that many dismissed in 2025 will regain its terrifying relevance.
