The yield on the two-year US Treasury is sensitive to the Fed’s monetary policy. It jumped above 4.0% for the first time since 2007 and is higher than the 10-year and 30-year US Treasury yields.
As of 10:38 pm Thai time, the yield on two-year government bonds was at 4.006%, the highest level since October 2007. The 10-year bond yield was at 3.563% and the 30-year government bond yield was at 3.564 %.
The surge in 2-year US Treasury yields was driven by expectations that the US Federal Reserve (Fed) is raising interest rates to curb inflation.
However, short-term bond yields rebounded higher than long-term ones. As a result, the US bond market has an inverted yield curve, which is a sign of recession.
Investors expect the Fed to raise interest rates by 0.75% at its monetary policy meeting today. and increased by 0.75% at the November meeting. before accelerating, raising interest rates by 0.50% in December
The CME Group’s FedWatch Tool shows that investors weigh 84% that the Fed would raise interest rates by 0.75% to 3.00-3.25 percent at its September 20-21 meeting, and weight 64.3% that the Fed would raise interest rates 0.75% to 3.75 -4.00% at its meeting on 1-2 November, while 46.8% weigh that the Fed will raise interest rates 0.50% to 4.25-4.50% at its meeting date 13-14 Dec.
If the Fed raises such interest rates as expected. This will lead to the Fed raising interest rates by 0.75% four times in a row at the June, July, September and November meetings. Meanwhile, the Fed’s policy rate will hit 4.50% by the end of the year. And it will keep the interest rate above 2.50%, the level the Fed considers neutral. neither too relaxed nor too strict