Inflation cooled off. But yields didn’t. The headline Consumer Price Index rose 2.4% year-over-year in June 2025. That’s the slowest pace since early 2023. Energy dropped 9.8%. Used cars are flat. Apparel nudged up 0.3%. But food went up 3.1%, rent climbed 4.0%, and restaurants are still rising at 3.8%. The daily costs aren’t letting up.
That’s why 10-year Treasury yields are sticking near 4.28%. Almost matching the 2022 highs. The surface shows disinflation. Underneath, the mix is noisy. Trump’s tariff expansion pushed average import duties to 15.8%, the highest since 1936. Repricing is already creeping in through supply chains. Core inflation is expected to rebound toward 3.4% by Q3 and possibly reach 4.2% in Q4.
If inflation is down, why are yields at near all-time highs? pic.twitter.com/7Mbw3amxw8
— The Great Martis (@great_martis) July 5, 2025
The Federal Reserve hasn’t made a move since May. Powell is holding for clarity on the trade war trajectory. There’s no meeting in August, so July decisions are critical. If inflation stabilizes, a rate cut remains possible. If tariffs spike prices again, the Fed stalls. The bond market has baked that indecision into its spine.
Consumer confidence fell to 93 in June, lowest in 2025 so far. Spending remains steady. But sentiment dipped. Economists are calling this a “dual-track recovery.” Real wages grew 2.1%, but savings rates dropped to 4.3%, the lowest since October 2022. Credit card delinquencies have risen for 5 straight months.
Meanwhile, equities keep climbing. S&P 500 is up 8.3% year-to-date. Bitcoin hovers above $107,000. NASDAQ added 4.2% in June alone. Risk is back in style. But the bond market isn’t playing that game. Yields are holding high because traders see fog ahead—not clarity.
So yes, inflation technically dropped. But rent and food are still rising. Trade policy is injecting fresh costs. Energy is cooling. Shelter remains sticky. The Fed hasn’t moved. And the debt markets are reacting to what might come—not what already did.
Sources:
https://nchstats.com/us-inflation/
https://www.investopedia.com/what-will-happen-with-inflation-in-the-second-half-of-2025-11760448