Demand Imbalance Arbitrage

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Forecast Future Price Action

Fed Raises Rates Again: 2-Year Yield Hits High Not Seen Since 2006


The Federal Reserve’s recent 25 basis-point rate hike is leading to higher yields on Treasury notes, with the 2-year Treasury yield hitting a high not seen since 2006 and the 10-year yield surpassing the 4% mark for the first time since early November. The yield on the 2-year Treasury rose to levels not seen in almost seventeen years as investors pondered further Fed rate hikes. The 10-year Treasury yield increased by more than 3 basis points to 4.028%.

The Fed fund futures are pricing in the Fed’s target rate to peak around 5.42% in September, up from the current 4.50-4.75%. This is in response to the increasing ‘higher-for-longer’ rates view, following the higher-than-expected US data this month.

The yield on two-year bonds increased to 4.72%, and the yield on 30-year bonds rose to Meanwhile, the 2-year yield climbed slightly to 4.801% after reaching its highest level since November on Monday. Prices and yields move in opposite directions.[0]

Fed officials have indicated that further rate hikes are on the horizon, especially in light of stubbornly high inflation rates.[1] Atlanta Fed President Raphael Bostic said he believes rates will need to go higher still and remain elevated “well into 2024” as the battle with inflation continues.[1] Minneapolis Fed President Neel Kashkari has also indicated that he is open to either a 25 or 50 basis point increase at this month’s policy meeting.

It is worth noting that yields and prices have an inverted relationship, with one basis point equalling 0.01%.[2] This means that as yields increase, prices decrease.[3]

The Fed has raised its policy rate eight times since March 2022, most recently to a range of 4.5%-4.75% on Feb. 1.[4] It is mostly expected to take its fed-funds rate target to a cycle peak of between 5.25% and 5.50%, or higher, by September.

It is clear that the Fed is not going to pause and will hike again at its March 22nd meeting.[5] As a result, investors must be prepared for an increase in interest rates and the potential for a half-point increase, rather than the usual quarter-point increase.

0. “10-year Treasury yield briefly hits highest level since November” CNBC, 28 Feb. 2023,

1. “Ten-year Treasury yields move further above 4%” msnNOW, 2 Mar. 2023,

2. “2-year Treasury Yield Attains 17-year High amid Sustained Fed Rate Hikes” Coinspeaker, 2 Mar. 2023,

3. “@theMarket: Bond Yields Weighing on Stocks”, 24 Feb. 2023,

4. “Entire Treasury Market Yields at Least 4%, Now Including 30-Year” Yahoo Finance, 2 Mar. 2023,

5. “Analysis | Bond Yields are Jumping at Federal Reserve Phantom Shadows” The Washington Post, 24 Feb. 2023,

Forecast Future Price Action
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