Treasury Yields March 2026: Duration Dashboard

Weekly close-to-close changes of 1–6 basis points across the curve understate the intraweek volatility that defined trading. The week opened with a modest rally on Monday following President Trump's announcement of a pause on Iranian energy infrastructure strikes. That relief proved short-lived as Tuesday's $69 billion 2-year auction posted a bid-to-cover ratio of just 2.44—the weakest since May 2024—with direct bidder participation at its lowest since March 2025. Wednesday's $70 billion 5-year auction similarly disappointed, with nearly 90% allotted at the high yield. Thursday completed a third consecutive soft result with the $44 billion 7-year auction posting a 2.43 bid-to-cover, below the 2.5 recent average. Bloomberg characterized the three-auction sequence as the weakest showing in a single week since May 2024.

Credit Pulse: Iran War Drives Spread Widening

Credit spreads widened for the fourth consecutive week as the combination of rising rates, elevated oil prices, and equity market weakness weighed on risk appetite. High yield spreads moved 17 basis points wider to 325 bp, the highest level since late 2024, though still in the 39th percentile of the 5-year range—well below historical distress thresholds. Investment grade widened more modestly at +2 bp to 86 bp. The NY Fed Corporate Bond Market Distress Index rose to its highest since May 2025, with the IG component at levels not seen since December 2023.

The more notable development was the continued widening of the gap between equity volatility and credit spreads. The VIX at 31.05 (93rd percentile) indicates broad risk aversion that credit spreads have yet to fully reflect—a pattern that historically precedes further spread widening. Primary issuance was subdued during the week given the volatile rate backdrop, though year-to-date corporate issuance through February had been running at $484.9 billion (+12.4% year-over-year). The municipal bond market remained active, with over $10 billion in new supply including notable transactions from New York City, Pennsylvania, and Nashville.

Federal Reserve Policy Outlook: Rate Hike Probability Rises

The most significant shift in market expectations this week was the move in fed funds futures to price a greater-than-50% probability of a rate hike by year-end—the first time this threshold has been crossed since the hiking cycle concluded. Rate cut expectations have been fully unwound, with the next full 25 bp cut not priced until approximately June 2027. Only about 18 bp of cumulative easing is priced through end-2026, down from roughly 50 bp at the start of March.

Three Fed officials spoke during the week. Vice Chair Philip Jefferson delivered remarks at the Dallas Fed, noting the economy continues to grow but the labor market is vulnerable to adverse developments and inflation remains above the 2% target. Governor Michael Barr spoke at Brookings on the economic outlook. Governor Stephen Miran—the sole dissenter at the March 18 FOMC meeting who preferred a 25 bp cut—spoke at the Economic Club of Miami, maintaining his dovish stance on balance sheet reduction. The March FOMC dot plot showed 14 of 19 members projecting zero or one cut in 2026, with the median still at one 25 bp reduction. The Summary of Economic Projections raised core PCE to 2.7% and GDP growth to 2.4%.

Iran Conflict and Energy Markets

The US-Iran conflict remained the primary driver of cross-asset volatility. Brent crude settled at $112.57/bbl and WTI at $99.64/bbl on Friday—up roughly 55% and 49% respectively since hostilities began on February 28. The Strait of Hormuz remained largely blocked to tanker traffic, disrupting approximately 20% of global crude and LNG flows. The IEA has characterized the disruption as the largest in the history of the global oil market.

Diplomacy generated daily reversals in rates and equities. Monday's rally on Trump's strike pause gave way to Tuesday's selloff. Wednesday saw brief optimism on a 15-point US peace proposal, which Iran rejected Thursday. Friday brought an extension of the energy-strike pause to April 6, though the Pentagon simultaneously weighed deploying 10,000 additional troops—maintaining maximum uncertainty heading into the new week.

On trade policy, the Supreme Court's February 20 ruling striking down IEEPA tariffs continues to reshape the tariff landscape. Section 122 replacement tariffs at 10% globally remain in effect for 150 days, while USTR Section 301 investigations into 60–80 economies continue. China launched two retaliatory trade investigations on March 27, targeting US export controls and barriers to green energy exports. For detailed analysis of the IEEPA ruling's market implications, see our February 22 report.

Week Ahead: April 6 Ceasefire Deadline Looms

• Iran Ceasefire Deadline (April 6): President Trump's extension of the energy-strike pause expires, making this the week's primary binary risk event for rates and energy markets. Resolution would likely drive a significant rally; escalation would push oil and yields higher.
• Conference Board Consumer Confidence (March 31): March reading will provide additional evidence on whether the sentiment deterioration reflected in Michigan data is broad-based. Consensus expects a decline given rising energy costs and market volatility.
• ISM Manufacturing PMI (April 1): The March reading follows the mixed S&P Global flash, which showed manufacturing strength alongside services weakness. The ISM prices paid component will be closely watched for energy pass-through.
• Nonfarm Payrolls (April 4): March employment report is the most important hard data point ahead of the next FOMC meeting. Consensus has not yet formed, but any weakness would challenge the rate hike narrative; continued strength would reinforce the Fed's patient posture.
• February PCE Inflation (delayed to April 9): Originally scheduled for late March, the delayed release will be the first official inflation reading since oil prices rose above $100. Core PCE is expected near 0.3% monthly, but upside risk is elevated given energy pass-through.

US Economic Positioning and Global Context

The US economy finds itself in an unusual position: relatively strong hard data (labor market, spending) alongside rapidly deteriorating soft indicators (sentiment, surveys) and a geopolitical shock that complicates both growth and inflation dynamics. The Iran conflict has created a supply-side energy shock that functions as a tax on consumers and businesses while simultaneously pressuring the Fed to maintain a restrictive posture against rising inflation expectations.

The dollar's modest strength at DXY 100.19 reflects the familiar dynamic of the US as a relative safe haven—even when the source of instability partly originates from US policy decisions. Breakeven inflation rates tell the story: the 5-year breakeven at 2.63% and 10-year at 2.34% both remain elevated versus the Fed's 2% target, embedding an energy risk premium that will not dissipate until either oil prices retreat or the geopolitical situation resolves. With gross national debt exceeding $39 trillion and $10 trillion requiring refinancing this year, the combination of higher rates and weakening auction demand poses a structural challenge for Treasury markets that extends well beyond the current conflict.

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