Monetary Policy

2-Year Treasury Rate

The 2-year Treasury yield reflects where the market expects the Fed funds rate to average over the next two years, so it moves ahead of the Fed rather than with it. It is the most policy-sensitive point on the curve: a falling 2-year is the bond market pricing cuts, a rising one is pricing hikes. The 2s10s spread (10-year minus 2-year) is the most-watched inversion signal.