The 2-Year U.S. Treasury Yield Has Now Blown Past the Federal Funds Rate. History Says the Fed Will Do This Next

Bond yields have surged as the Iran conflict drags on, gas prices remain elevated, and April inflation data came in hot. The combination of geopolitical risk, higher energy costs, and firmer inflation is pressuring fixed income markets and reinforcing a risk-off backdrop. This is likely supportive of yields staying higher for longer and broadly negative for duration-sensitive assets.

Analysis

Bond yields have surged as the Iran conflict drags on, gas prices remain elevated, and April inflation data came in hot. The combination of geopolitical risk, higher energy costs, and firmer inflation is pressuring fixed income markets and reinforcing a risk-off backdrop. This is likely supportive of yields staying higher for longer and broadly negative for duration-sensitive assets.