US 2-year yield surges this week, crossing 100-day moving average
Yields on two-year US Treasuries rose about 30 basis points in this week’s trading to 4.296%. The high yield on the day was 4.349%, the highest level since March 15, 2023. This week’s rally was the biggest since the week of Sept. 19, 2022, when yields rose nearly 34 basis points. Ironically, the yield for the week settled at 4.212%, just eight basis points off the current level of 4.296%.
This week’s rally was triggered by the good performance of local banks. That drained some of the flight to safety out of the market, leaving traders to price in more Fed rate cuts for 2024.
The KRE Regional Bank ETF is up 7.26% this week.
Boston Fed President Logan said yesterday that he would decide to raise rates by 25 basis points in June given current economic data. The Bullard Fed also leaned toward another 25 basis points (bp) rate hike.
Federal Fund futures for January are currently pointing at 4.65%. While this is still below the current target rate of 5.25%, the May implied yield reached a low of 4% on May 4th and recently reached 4.22% on May 11th. Reached.
Although the two-year yield has risen, it is still well off its 2023 high of 5.085% set on March 8, 2023.
Further out on the yield curve, 10-year bond yields are up 25 basis points (6.599%) this week. This was the biggest one-week gain since the week of December 19, 2022. Yields today climbed to a high of 3.719%, the highest level since March 13, 2023. The highest yield for 2023 reached 4.089% on March 2nd. The High Cycle Yield returns to 4.335% on October 21, 2022.
