The long run of steadily declining Treasury yields may have ended.
In trading Thursday, the yield on the two-year Treasury note poked back above the federal-funds target of 2.25%, something that’s rarely happened in the past three years. Furthermore, the two-year note’s yield of late is higher than the expected federal-funds rate six months from now, a dramatic reversal from a trend that has persisted since March 2005.
“This could be the watershed, the inflection moment we’ve been waiting for,” says George Concalves, chief Treasury and agency strategist at Morgan Stanley. “We’ve been so tightly wound up in rates because of strong flight-to-quality flows, which was justified cause people trying to figure out where the problems were with the banks. Now, we’ve seen that come off.”>>>MORE