Two-Year US Treasury Yield Hits Highest Since 2024 Amid Rate Hike Fears

US Treasury yields rose on Friday, reaching their highest since July 2024. The two-year yield was the most notable gain, increasing to its highest level in over a year.

The hike in rates by the Federal Reserve this week has investors weighing the outlook for further rate increases. Citing concerns about inflation, investors are now considering the prospect of a new global rate-tightening cycle.

According to TD Securities' Molly Brooks, US rates strategist, 'The two-year is going to be moving in tandem with hike pricing.' She noted that there's more risk of pricing in additional hikes rather than pricing out hikes at this point. The CME FedWatch tool suggests a 55% chance of another rate increase when the Federal Reserve next meets in October.

The yield curve between two- and ten-year notes was at its flattest since June 25, with the spread standing at 25.5 basis points. Longer-dated debt has been relatively stable due to the Fed's apparent willingness to control inflation.