The yield on two-year U.S. Treasury notes, a rough gauge of interest rate expectations, rose to almost a 15-year high on Tuesday, a day before the Federal Reserve is likely to hike rates by 75 basis points as it continues to fight inflation.
The two-year is highly sensitive to shifts in monetary policy expectations and early on Tuesday it hit 3.992%. The last time its yield broke above 4% was Oct. 18, 2007.
Yields on the benchmark 10-year Treasury shot to 3.604% before paring some gains. They were up 8.6 basis points to 3.575% after topping 3.5% for the first time in 11 years on Monday. The two-year yield rose 2.5 basis points to 3.971%. "There's a lot of jitters and some pre-positioning that's going into meeting," Gillum added. "Foreign rates moving higher, that makes our rates less attractive."
After the Fed statement on Wednesday the market will try to gauge whether the central bank will raise rates by 50 basis points in November, said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan. Tighter monetary policy is pushing rates up and different securities are setting new milestones. The breakeven rate on five- and 10-year Treasury Inflation-Protected Securities, or TIPS, have surged to 13- and 12-year highs, respectively.
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