10-Year Treasury Yield — Impact on Fed Rate Prediction Markets

How 10-Year Treasury Yield Moves Fed Rate Prediction Markets

Daily 10-year U.S. Treasury constant maturity yield — the benchmark long-term rate.

The 10Y yield is the market's long-run growth and inflation expectation. When it diverges sharply from the Fed funds rate, the spread becomes a policy signal.

The Bayesian Sensitivity Model

The model calibrates a sensitivity coefficient for each indicator: how many percentage points the odds at the next FOMC meeting shift toward a hike or a cut per standard deviation of surprise. For 10Y Yield, the preliminary coefficient is ±+/- 1–2pp on next-meeting odds. This means if10Y Yield comes in 1 standard deviation above consensus (hawkish surprise), the model shifts the odds toward a hike by approximately +/- 1–2pp on next-meeting odds.

These coefficients are preliminary until calibrated from at least 20 historical observations of Kalshi price reactions to each release. The calibration uses a regression of (surprise_zscore × sensitivity_coefficient) against observed Kalshi probability changes, cross-validated against CME FedWatch data going back to 2015.

Related reading: September 2026 hike — graded — the Fed raised to 3.75–4.00%; what Kalshi, Polymarket and futures priced, and which was closest.