The US 2-year yield rose sharply this week and is above the 100-day moving average
The two-year US yield rose nearly 30 basis points over the week, at 4.296%. Today’s high yield reached 4.349%, the highest level since March 15, 2023. The move to the upside this week is the biggest gain since the week of September 19, 2022, when yields rose nearly 34 basis points. Ironically, the yield settled at 4.212% this week, just 8 basis points away from the current level of 4.296%.
The catalyst for the upside this week was the better tone in the regional banks. That took some of the journey to safety flows out of the market and made traders seek further Fed cuts through 2024.
The KRE Regional Bank ETF is up 7.26% this week.
Boston Fed Chair Logan said yesterday that she will raise 25 basis points in June given the current economic data. Bullard also tipped the Fed towards another hike of 25 basis points.
January federal funds futures are at 4.65%. This is still below the current target rate of 5.25%, but the May implied yield reached 4% on May 4 and 4.22% on May 11.
Although higher, the two-year yield is still far from the 2023 high of 5.085% reached on March 8, 2023.
Further up the yield curve, the 10-year yield rose 25 basis points this week, or 6.599%. This is the largest one-week gain since the December 19, 2022 week. The yield rose today to 3.719%, the highest level since March 13, 2023. The high yield in 2023 reached 4.089% on March 2. The cycle high return came back on October 21, 2022 at 4.335%.