1Y Treasury Yield vs Fed Funds Rate
The 1-Year Treasury Constant Maturity Yield (FRED series DGS1) trades approximately 3.48% in late April 2026, versus the fed funds target range upper bound of 3.75% and lower bound of 3.50%. The 1Y minus fed funds spread of negative 2 to negative 27 basis points means markets price approximately one 25 basis point cut over the next 12 months, consistent with the March 2026 SEP median dot at 3.10% by year-end.
Also known as: 1Y Treasury Yield (1Y yield, 1 year treasury) · Federal Funds Rate (fed rate, interest rate)
Why This Comparison Matters
The 1-Year Treasury Constant Maturity Yield (FRED series DGS1) trades approximately 3.48% in late April 2026, versus the fed funds target range upper bound of 3.75% and lower bound of 3.50%. The 1Y minus fed funds spread of negative 2 to negative 27 basis points means markets price approximately one 25 basis point cut over the next 12 months, consistent with the March 2026 SEP median dot at 3.10% by year-end. The pair is the cleanest single-pair read on the market's near-term Fed expectation, stripping out longer-horizon noise that contaminates 2-year and 5-year readings. When 1Y sits below fed funds, markets expect cuts within a year; when 1Y sits above, markets expect hikes or persistently higher rates.
What the 1Y yield and fed funds rate each measure
The 1-Year Treasury Constant Maturity Yield (DGS1) is the daily yield on 1-year US Treasury bills as published in the Federal Reserve H.15 release. It is calculated from the daily yield curve smoothing of actively traded Treasury bills with maturities clustered around the 1-year mark. The yield embeds the average expected fed funds rate over the next 12 months plus a small term premium that ranges from approximately negative 5 to plus 25 basis points across modern history.
The Federal Funds Rate (FEDFUNDS on FRED) is the effective rate at which depository institutions trade overnight federal funds, published monthly by the New York Fed and constrained within the FOMC target range. As of April 30, 2026 the upper bound is 3.75% and the lower bound is 3.50%, with the effective rate trading near the middle of the corridor at approximately 3.62%. The 1Y minus fed funds calculation depends on which boundary you use, but the most informative version is 1Y minus the upper bound, currently 3.48% minus 3.75% equals negative 27 basis points. That spread has averaged approximately negative 35 basis points across the post-2010 cycles.
The April 2026 configuration: pricing one cut, no more
The negative 27 basis point spread in April 2026 prices approximately one full 25 basis point cut over the next 12 months, almost exactly matching the March 2026 SEP median dot of 3.10% by year-end 2026. The April 29, 2026
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Frequently Asked Questions
What is the current 1Y Treasury versus fed funds spread?+
The 1-Year Treasury Constant Maturity Yield trades at approximately 3.48% in late April 2026, while the fed funds target range is 3.50% to 3.75% (effective rate near 3.62%). The 1Y minus fed funds upper bound spread is negative 27 basis points, pricing approximately one 25 basis point cut over the next 12 months. This matches the March 2026 SEP median dot of 3.10% by year-end 2026.
What does the 1Y-fed funds spread predict?+
The spread embeds the average expected fed funds rate over the next 12 months plus a small term premium. When 1Y sits well below fed funds, markets expect cuts; when 1Y sits above, markets expect hikes or persistently higher rates. The spread has inverted seven times since 1976, with five of those inversions preceding recession by 4 to 12 months. The 2019 inversion was anomalous (no recession before COVID overrode the signal); the 2022 to 2026 inversion is unprecedented in lasting through April 2026 without producing a recession.
How accurate is the spread as a recession signal?+
The 1Y-fed funds spread has a historical recession-prediction record of approximately 5 of 7 inversions since 1976 (depending on how you count the 2019 episode). Mean lag from inversion onset to recession start is 8 months, range 4 to 12 months. The current 2022 to 2026 episode is the most extended modern inversion that has not produced a recession, prompting Cleveland Fed and academic discussion of structural changes that may have weakened the signal.
Why was the 2022 inversion so deep?
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Data sourced from FRED, CoinGecko, CBOE, and other providers. This page is for informational purposes only and does not constitute financial advice. Past performance does not guarantee future results.