The latest fair-value model for the US 10-year Treasury yield suggests the benchmark rate is higher than expected based on economic fundamentals.

US 10 Year Treasury Yield

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Market conditions are gradually closing the gap between the long-standing trend and the recent 10-year yield decline, indicating normalization.

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The gap is closing as the market yield drops. Yesterday's trading saw a 4.21% 10-year rate, approaching a three-month low.

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The 10-year yield keeps falling from its October high, showing a continued downward trend in momentum. The retreat persists.

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The 10-year rate's fair-value estimate for November is 3.18%, significantly lower than the current market rate by over 100 basis points.

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The big gap indicates the market rate might drop, or the fair value could go up, or both things happening.

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Last month's estimated value barely shifted from October. The recent spread tightening is solely due to market fluctuations.

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Market rate spread over fair value remains high at 131 basis points as of November, yet the trend propelling it seems to ease.

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Fair-value modeling doesn't predict market timing, but it provides context. The recent market yield gap vs. fair-value estimate seems to have peaked.

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