Mid-December is shaping up as one of the most consequential stretches of the year for the U.S. Treasury market—not because investors lack information, but because too much of it is about to arrive at once.
After the Federal Reserve’s December rate cut and a surprise pivot back to technical Treasury bill purchases to steady money markets, traders are now bracing for a shutdown-delayed burst of jobs and inflation data that could reprice the entire yield curve before year-end. Meanwhile, the U.S. Treasury’s auction calendar marches on, with key mid- and late-December auctions still ahead—right as liquidity conditions typically tighten into the holidays. [1]
What follows is the most likely path for Treasury yields and prices through the rest of December 2025, based on the latest market levels, official policy signals, auction schedules, and the freshest analyst positioning and coverage from the last several days.
Where US Treasury yields stand in mid-December 2025
As of the latest complete set of daily benchmark readings (Thursday, Dec. 11), the Treasury curve is decisively steepening compared with earlier in the easing cycle:
- 2-year Treasury: 3.52%
- 10-year Treasury: 4.14%
- 30-year Treasury: 4.79% [2]
That puts the 10-year/2-year spread around +0.62 percentage points, and the 30-year/10-year spread around +0.65—a clear signal that the market is still demanding a meaningful premium to hold long-duration bonds even after the Fed has started cutting.
Inflation pricing also looks relatively anchored—at least on a 10-year horizon. The 10-year breakeven inflation rate stood at 2.26% (Dec. 12), while the 10-year real yield was 1.89% (Dec. 11). In plain terms, a large chunk of today’s long-end yield is “real”—not just inflation compensation. [3]
This mix—high real yields + steady long-run inflation expectations—is a big reason December’s Treasury forecast is less about a slow drift and more about whether the next data wave forces a rapid reset in growth, inflation, and Fed expectations.
The Fed’s December move: a cut, a warning about risks, and a return to bill buying
On Dec. 10, the Fed cut its target range by 25 basis points to 3.50%–3.75% and explicitly highlighted that it sees downside risks to employment rising. [4]
But for Treasury investors, the bigger December headline may be what came alongside the rate decision: the Fed said reserve balances have declined to “ample levels” and that it will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves. [5]
In the days since, multiple outlets have framed the restart of purchases as a liquidity-management operation, not a renewed stimulus program:
- Reuters reported the Fed will begin buying short-dated Treasury bills starting Dec. 12, with an initial phase of about $40 billion, after ending quantitative tightening. [6]
- The Financial Times described the move as a response to money-market strains, with the Fed seeking to stabilize short-term funding markets. [7]
- The Wall Street Journal similarly emphasized repo-market volatility and reserve management as the motive. [8]
Then, on Dec. 11, Reuters reported the New York Fed’s operations desk published a schedule totaling more than $54 billion in transactions between Dec. 12 and Jan. 14, including roughly $40 billion in reserve-management purchases and about $14.4 billion in reinvestment purchases. [9]
What that means for Treasuries into year-end
For a December 2025 Treasury bonds forecast, the Fed’s bill purchases matter in a very specific way:
- They are most directly supportive for T-bills and the front-end (where money-market plumbing and reserve dynamics dominate).
- They can indirectly help the broader curve by reducing the risk of a late-December funding squeeze—but they do not automatically cap long-term yields if inflation or fiscal concerns reaccelerate.
In short: the Fed may be trying to keep December’s liquidity stress from becoming January’s crisis. But it’s not promising long-duration bondholders a rally.
Why the long end is still heavy: “higher for longer” isn’t dead—it moved down the curve
Even after rate cuts, long Treasuries have struggled to sustain rallies in early December. Barron’s described it as a rough start to the month, with long-duration Treasuries under pressure as investors adjust to the idea of fewer cuts in 2026 than previously hoped. [10]
That shift is also visible in professional positioning. Reuters reported that bond investors have been rotating away from long-duration exposure and toward the “belly” of the curve (intermediate maturities), anticipating a shallow easing cycle rather than a rapid march back to ultra-low rates. [11]
And there’s a structural angle here: some strategists argue the long end has a yield floor because the market’s estimate of the neutral real rate has risen over the past few years. MarketWatch pointed to the idea that if the real neutral rate is higher, long-term yields don’t need a crisis to stay elevated—they can remain high even in a soft-landing world. [12]
Bottom line for December: the long end is likely to remain the curve’s “stress point,” where hot inflation or fiscal anxiety shows up first.
The delayed data wave: the single biggest swing factor for December 2025 Treasuries
The cleanest reason the Treasury forecast for the rest of December is unusually conditional: the U.S. economy is about to deliver a backlog of data after a government shutdown disrupted normal releases.
Investopedia summarized the problem bluntly: key federal statistics agencies fell behind after a 43-day shutdown, leaving markets waiting on critical inflation and employment reports that normally anchor rate expectations. [13]
Reuters has also spotlighted the “catch-up” effect. In a Week Ahead piece, Reuters quoted Nomura’s David Seif saying that because of the shutdown-delayed schedule, markets could see essentially three months of labor and inflation data released between the December and January Fed meetings. [14]
The two dates Treasury traders are circling
Dec. 16: The shutdown-delayed employment report. Reuters has repeatedly flagged the timing, including in its shutdown catch-up scheduling. [15]
Dec. 18: The delayed CPI release. Importantly, the BLS has warned that the November 2025 CPI release will have limitations: it “will not include” certain one‑month percent changes for November where October data are missing. [16]
How this changes the Treasury forecast
Normally, December is about incremental adjustments. This year, it could be about regime-checking:
- If the data backlog confirms cooling inflation and softer hiring, the market can lean into a “soft-landing with cuts” narrative and pull yields down.
- If it shows stickier inflation or resilient demand, the curve can reprice quickly toward fewer cuts—and potentially re-steepen via higher long-end term premium.
The key is that the information flow is lumpy, and the market has less “recent” data than usual to smooth expectations—something Fed Chair Powell has also alluded to in the context of limited inflation updates since the October meeting. [17]
Treasury auction supply: what’s left on the calendar and why it matters
Auctions can move markets in any month. In December, they can matter more, because liquidity is thinner and positioning is often one-sided into year-end.
What just happened: 10-year and 30-year auctions set the tone
Recent results show long-term funding costs are still high:
- The 10-year note reopening (auctioned Dec. 9) stopped at a high yield of 4.175%. [18]
- The 30-year bond (auctioned Dec. 11) stopped at a high yield of 4.773%. [19]
Those yields line up closely with where benchmark rates have been trading, reinforcing the idea that—at least so far—investors are willing to absorb supply, but not at meaningfully lower yields.
What’s still ahead in December 2025
According to the Treasury’s Tentative Auction Schedule, the next major late-month supply events include: [20]
- 20-year bond auction: Dec. 17 (settles Dec. 31)
- 5-year TIPS auction: Dec. 18 (settles Dec. 31)
- 2-year note auction: Dec. 22 (settles Dec. 31)
- 5-year note auction: Dec. 23 (settles Dec. 31)
- 7-year note auction: Dec. 24 (settles Dec. 31)
For market pricing, those settlement dates matter because they cluster funding needs right into year-end balance sheet constraints.
Issuance guidance: Treasury expects stable coupon sizes—and tweaks bills instead
In the Treasury’s November quarterly refunding statement, officials said they anticipate maintaining nominal coupon and FRN auction sizes for at least the next several quarters, while using bills and cash management tools to manage seasonal needs. [21]
Treasury also explicitly flagged December bill dynamics:
- It expects modest reductions to short-dated bill auction sizes during December due to projected receipts, then anticipates increasing bill sizes again by mid-January 2026 based on expected outflows. [22]
And Treasury emphasized buybacks as part of the toolkit, including the resumption of cash management buybacks in December 2025, which “temper reductions” to bill auction sizes that would otherwise occur. [23]
This matters for the December outlook because, at the margin, net supply—not just headline issuance—can affect auction tails, liquidity premiums, and the term premium embedded in long yields.
What Wall Street is forecasting right now: “belly wins,” long duration stays risky
Across the last several days of coverage, the market’s dominant message is consistent:
- Intermediate maturities look attractive if cuts continue but remain shallow.
Reuters reported investors shifting toward the middle of the curve for “juicier returns” (carry/roll dynamics) while staying cautious on long duration. [24] - Long bonds are where surprises hurt most.
Barron’s highlighted how long Treasuries can struggle when markets downgrade the number of future rate cuts—especially in a month with auctions and a Fed meeting in the same week. [25] - Money-market mechanics are back in focus.
The Fed’s return to bill purchases has become a key part of the near-term narrative, as described by Reuters, FT and WSJ—particularly ahead of year-end funding pressures. [26]
December 2025 US Treasury bonds forecast: three scenarios for yields into year-end
No single point forecast can capture December’s setup. A more realistic approach is to frame the next two weeks as a contest between data surprises, auction absorption, and liquidity conditions.
Scenario 1: “Cooling data” rally (bullish for Treasuries)
What would trigger it: The Dec. 16 jobs report shows clear labor-market softening, and the Dec. 18 CPI print (even with the BLS caveats) suggests inflation is easing rather than reaccelerating. [27]
Market reaction:
- 2-year yields fall as the market prices in a steadier 2026 cut path.
- 10-year yields drift lower, but the long end may lag if investors still demand term premium.
December implication: A rally, but likely led by the front end and belly, consistent with current positioning. [28]
Scenario 2: “Sticky inflation” repricing (bearish for Treasuries)
What would trigger it: CPI surprises to the upside or signals that services inflation is not cooling fast enough, pushing expectations toward fewer 2026 cuts.
Market reaction:
- 2-year yields rise or stop falling.
- 10-year and 30-year yields could rise more if term premium rebuilds.
December implication: Long-duration underperforms, and auctions (especially 20-year) may need higher yields to clear smoothly.
Scenario 3: “Year-end liquidity flare-up” (front-end volatility, mixed long-end impact)
What would trigger it: Funding markets tighten into quarter- and year-end, or reserve demand jumps, even with the Fed’s bill purchases.
Market reaction:
- Bills and very short maturities become volatile.
- The curve can move in non-intuitive ways: sometimes risk-off rallies long bonds; other times liquidity stress pushes yields up through technical selling.
December implication: Bigger day-to-day swings, with the Fed’s operations acting as a stabilizer but not a guarantee. [29]
The key things to watch through the rest of December 2025
If you’re tracking the Treasury market into year-end, the highest-impact checklist is straightforward:
- Dec. 16 jobs report: the labor signal that can shift the Fed path quickly. [30]
- Dec. 18 CPI: inflation expectations and real yields will respond fast, especially given the unusual data-release circumstances. [31]
- 20-year auction (Dec. 17): a stress test for long-end demand. [32]
- Year-end settlement cluster (Dec. 31): multiple notes/bonds/TIPS settle, tightening balance sheets. [33]
- Fed bill purchase cadence: whether reserve management operations calm repo and bill rates as intended. [34]
- Treasury bill sizing and buybacks: net bill supply changes can ripple into broader funding conditions. [35]
Outlook summary: range-bound until the data lands, but risks are two-sided
The most defensible US Treasury bonds forecast for December 2025 is a market that stays range-bound with elevated volatility—until the backlog of labor and inflation data hits, at which point yields can reset quickly.
- The front end has a built-in anchor: a Fed that’s already cutting, and now actively managing reserves via bill purchases. [36]
- The belly of the curve remains the market’s consensus “sweet spot,” consistent with investor rotation and strategy commentary in recent days. [37]
- The long end remains the biggest wild card—caught between the gravitational pull of slowing growth (bullish) and the persistent weight of term premium, supply, and fiscal uncertainty (bearish). [38]
As always, this is market analysis, not investment advice. But for readers watching Treasuries into year-end, the message is clear: December 2025 isn’t ending quietly—Treasury yields are heading into the loudest data week of the quarter.
References
1. www.federalreserve.gov, 2. fred.stlouisfed.org, 3. fred.stlouisfed.org, 4. www.federalreserve.gov, 5. www.federalreserve.gov, 6. www.reuters.com, 7. www.ft.com, 8. www.wsj.com, 9. www.reuters.com, 10. www.barrons.com, 11. www.reuters.com, 12. www.reuters.com, 13. www.investopedia.com, 14. www.reuters.com, 15. www.reuters.com, 16. www.bls.gov, 17. www.federalreserve.gov, 18. www.treasurydirect.gov, 19. www.treasurydirect.gov, 20. home.treasury.gov, 21. home.treasury.gov, 22. home.treasury.gov, 23. home.treasury.gov, 24. www.reuters.com, 25. www.barrons.com, 26. www.reuters.com, 27. www.reuters.com, 28. www.reuters.com, 29. www.reuters.com, 30. www.reuters.com, 31. www.bls.gov, 32. home.treasury.gov, 33. home.treasury.gov, 34. www.reuters.com, 35. home.treasury.gov, 36. www.federalreserve.gov, 37. www.reuters.com, 38. www.reuters.com
