The 2-year Treasury yield hit its highest level since January 2025. That was eight months ago. Eight months. The financial media breathlessly reported this as if January 2025 was the Paleolithic era and we've finally clawed our way back to pre-agricultural levels of interest rates.
The jobs report came in hot. Inflation remains sticky. Two pieces of economic data that have been released every single month for decades, yet somehow this combination grants the Federal Reserve "more cover" to hike rates in September. Cover. As if Jerome Powell has been hiding under his desk waiting for permission to do his job. As if the Fed needs a permission slip from the non-farm payrolls to raise rates a quarter point.
Here's what actually happened. A number went up. Another number stayed roughly where it was. Treasury yields reacted by going up a few basis points. Traders who bought duration last week because some guy on FinTwit said the Fed was done tightening got their faces ripped off. Again.
The chart of the 2-year yield shows a simple range. It's been bouncing between the same levels since March. You could have drawn two horizontal lines in fifteen seconds and saved yourself from reading seventeen think pieces about what the Fed might do. But you didn't draw those lines. You read the think pieces. You probably forwarded one to your brother-in-law.
September rate hikes are now back on the table, apparently. They were off the table last week. They'll be off the table again in three weeks when someone at the Fed gives a speech using the word "patient." Then some retail trader will leverage long bonds at 10-to-1 and act surprised when volatility exists.
The 2-year yield will keep doing what it's been doing since interest rates were invented: moving up and down based on where rates are actually going, not where CNBC guests wish they were going.
Photo by KOBU Agency on Unsplash
Leave a Comment