US 2-Year Treasury Yield Skyrockets as Rate Hike Odds Reach 60%

The US 2-year Treasury yield shot up on August 28, rising to around 4.32-4.36% in a single session.

This increase of as much as 12.8 basis points comes as traders now price a roughly 60% probability of a Fed rate hike at the September FOMC meeting, nearly double the 35% odds implied just one day earlier.

Speaking at Jackson Hole, Warsh made it clear that the Fed isn't ready to declare victory on inflation and would take necessary actions if inflation doesn't return to the 2% target quickly enough, reinforcing short-term interest rates as the Fed's primary policy weapon.

The yield curve itself tells the story of expectations for tighter monetary policy ahead, with shorter-term yields rising faster than their longer-term counterparts, flattening the curve.