U.S. Treasuries closed June with modest gains as inflation expectations fell sharply. The 10-year note settled at 4.38% and the two‑year at 4.07% on June 26, snapping a five‑month performance drought. The gain also narrowed the spread between 10‑year and two‑year yields, relieving fixed‑income managers after an equity‑driven sell‑off, signaling renewed investor confidence in safe‑haven assets.

The rally coincided with the 10‑2 yield spread turning positive since late 2024. A negative spread precedes recessions by 18 to 48 weeks; last sustained negative stretch ran from July 2022 to August 2024. Watch the spread as a leading recession gauge. The spread’s 10‑2 metric staying above zero cuts recession odds. With the spread now positive, investors price in a lower probability of a near‑term slowdown.

Lower inflation expectations also nudged mortgage rates down, with Freddie Mac reporting a 30‑year fixed rate of 6.49%. Fixed‑income ETFs such as Vanguard’s VGIT and VGLT saw inflows as investors rebalanced toward longer durations. Portfolio managers view the rally as a counterweight to tech‑heavy indexes that have lagged this year, home‑buyers benefit as lower rates ease financing costs across the housing market.