Yield on 2-year Treasury note hits highest level since July 2007 as markets absorb Fed rate hike

The yield on the 2-year U.S. Treasury note climbed to its highest level since July 2007 on Thursday as markets weighed the Federal Reserve's fourth consecutive 75 basis point rate hike and warnings of more increases ahead.

The policy-sensitive 2-year Treasury was up last up 12 basis points after notching a 15-year high of 4.739%.

The yield on the benchmark 10-year Treasury, meanwhile, rose by around 7 basis points to trade at 4.136%. Yields and price move in opposite directions. One basis point equals 0.01%.


As previously expected, the Federal Reserve announced another 75 basis point interest rate hike on Wednesday as it battles persistently high inflation.

Markets had also hoped for guidance around future interest rate policy from the Federal Reserve, as concerns about the central bank hiking rates too much too quickly and dragging the U.S. economy into a recession have spread.

In his remarks, Powell said that the terminal rate will go higher than expected, and that any talk of rate hikes pausing would be "premature."

However, he left the window for policy change open, saying that the Federal Reserve would consider the impact of its policy on the broader economy.

"Bond traders having a tug-of-war from the two different stories that the Fed presented yesterday," said KKM Financial CEO Jeff Kilburg. "The emotionally and wildly hawkish-filled Q&A press conference is currently winning but, the battle is not over. These rates do not seem sustainable, a back-and-fill opportunity is coming which will move yields lower across the curve."

Traders are looking ahead to Friday's October nonfarm payrolls report for further clues into the health of the U.S. economy. Economic reports continue with next week's consumer price index report for October.