2-Year Treasury Yield Hovers Above 4.1%, Gap With 10-Year Treasury Widens

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The yield on the 2-year Treasury note hovered above4.1% on Thursday as the gap with the 10-year Treasury widened, further inverting the yield curve.

The policy-sensitive 2-year Treasury was last up nearly 13 basis points to 4.122%. Earlier in the day, it had soared as high as 4.163% and notched a fresh high dating back to October 2007.

The benchmark 10-year Treasury was last up nearly 20 basis points to 3.71%, after rising as high as 3.716% earlier in the session and hitting a more than 11-year high.

The gap between the 2-year and 10-year notes at one point widened as much as 56.8 basis points, further inverting the yield curve. Some analysts view short-term rates being significantly higher than long-term rates as a sign of a recession.

Yield and prices have an inverted relationship, with one basis point equaling 0.01%.

On Wednesday, the Fed announced a 75 basis point interest rate hike in an effort to curb persistent inflation. That's lower than the 100 basis point hike some investors had anticipated, but the central bank suggested it would continue to hike rates throughout 2022 and 2023.

This policy is set to continue until fund levels reach either a "terminal rate" or a level of 4.6% at the end of 2023, central bank officials indicated.

The surge in yields and the ongoing curve inversion not only puts pressure on growth stocks but also heightens economic slowdown fears ahead, said Truist's Keith Lerner.

"If rates keep going higher and higher into an economy that's already slowing, it just raises recession probabilities," he said.

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