2-year Treasury yield hits crisis-era high on rising rate-hike

• January 14, 2018
• realestatelife
• Announcements, Business & Markets, Real Estate, Real Estate Finance

Solid inflation data on Friday sparked anxiety that the bounce in consumer prices would strengthen the Federal Reserve’s resolve to tighten monetary policy at a more aggressive pace.

Those fears sent prices for short-dated debt tumbling and yields higher. The 2-year note yield rose 4.2 basis points to 2.014%, its highest level since September 2008 when the financial crisis still had its grip on markets. Bond prices fall when yields rise.
The move came after a report showed the core consumer price index rose 0.3% in December, above forecast of 0.2%. Core CPI strips out volatile food and energy prices.

Sensitive to shifting expectations for Fed policy, the 2-year yield has made an uninterrupted ascent since last September after analysts started to circle around the view that the U.S. central bank was intent on driving interest rates up even if inflation remains stubbornly below expectations. The Fed drew the fire of market participants who felt its actions were verging on a policy mistake.

But after Friday’s data, investors said fading talk of a persistent lack of price pressures could give policy makers the confidence to ratchet up their pace of rate hikes. Some senior Fed officials have publicly stated their desire to see even higher interest rates, which can be later lowered to combat a future recession.

Expectations for a quarter-percentage-point hike in March has risen to 87.9%, according to fed fund futures data.