2-Year Treasury Yield Hits Multi-Year High Amid Fed Rate Hike
The 2-year U.S. Treasury yield reached an intraday high of 4.744% on September 18, marking its highest level since July 2024 amid expectations that the Federal Reserve may deliver another rate hike following this week's decision. The Fed raised rates earlier in the week and Chair Kevin Warsh hinted at further increases, leading traders to price in a 58% probability of an October hike as measured by CME’s FedWatch tool. The yield curve has continued to flatten, with the gap between the 2-year and 10-year yields narrowing significantly. The 10-year Treasury yield reached 4.998%, holding above 5% for a brief period ahead of the rate decision—a level not seen since 2007. Rising crude oil prices due to geopolitical tensions in Iran and shipping disruptions through Hormuz also contributed to inflation concerns, influencing market expectations. Higher-than-expected August consumer price data reinforced fears that annual inflation remains well above the Fed’s target, pushing traders toward higher rate-hike probabilities ahead of Wednesday's decision.
Topics: Federal Reserve rate hike expectations Treasury yields