The 10-year Treasury yield ends the year relatively steady at approximately 3.86%, despite the volatile market conditions.

On Friday, the 10-year Treasury note yield remained relatively stable as investors focused on the future of the economy and monetary policy, while traders concluded a significant year for bonds.

The yield on the Ross less than 2 basis points to 3.866%, while the 2-year Treasury yield inched down about 3 basis points to 4.25%.

Prices and yields move in opposite directions, with one basis point equal to 0.01%.

In 2023, the Federal Reserve's aggressive hiking campaign and concerns about high inflation and a potential recession led to a significant increase in Treasury yields. The 10-year yield surpassed the 5% threshold in October for the first time since 2007, before dropping below 3.9% in recent weeks on expectations of an end to rate increases and potential cuts in the new year.

What is uncertain is when the central bank will start reducing interest rates and how many cuts will be made by 2024.

The Fed anticipates reducing interest rates three times in 2023, but some investors are hoping for more cuts. Markets are forecasting the first rate cut to occur in March 2024, according to CME Group’s FedWatch tool.

Despite the uncertainty surrounding the U.S. economy and the Fed's ability to avoid a recession with elevated interest rates, the Fed continues to aim for a soft landing.

Holger Schmieding, the chief economist of Berenberg, stated in a note on Friday that he expects the annualized growth rate in the U.S. to fall below 1% in H1 2024. Despite this, the Fed is still on track to achieve a soft landing in 2024. The easing of underlying inflation has caused bond and equity markets to respond to the Fed's pivot theme.

Schmieding expects the first Fed rate cut in May.

Bond markets in the U.S. shut down early on Friday and will remain closed on Monday to mark the beginning of the new year.