US two-year Treasury yield hits highest level since 2009

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Investors fled US government bonds on Wednesday and pushed the yield on the 2-year Treasury note to a seven-and-a-half year high amid growing expectations that the Federal Reserve will raise interest rates this month.

Yield on the policy sensitive 2-year note, which moves inversely to price, jumped by as much as 4.4 basis points to hit 1.3041 per cent – its highest level since August 2009.

The benchmark 10-year Treasury climbed by as much as 7.8 bps to 2.4688 per cent.

The sharp moves come after several top Fed policymakers signalled a willingness to potentially increase rates this month.

William Dudley, president of the New York Fed, said on Tuesday that the case for policy tightening had become “a lot more compelling”. His remarks followed those from San Francisco head John Williams who noted that an increase in March is “very much on the table for serious consideration”.

The odds of a March rate increase shot up to more than 80 per cent, from less than 30 per cent last week, according to Bloomberg data on federal funds futures.

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