US 2-yr T-yield at highest since 2008, curve flattens ahead of Fed minutes

• Two-year yield rises to highest since September 2008.
• Treasury yield curve flattens.
• Focus on Fed minutes.

The short-term borrowing costs in the US as represented by the two-year Treasury yield rose to a decade high ahead of the Fed minutes release. 

The yield on the 2-year note rose to 2.282 percent - the highest level since September 2008. Meanwhile, the curve (the difference between the 10-year yield and the 2-year yield) flattened (narrowed) to 63.2 basis points (bps), the lowest since Feb. 1. 

Bond market experts are associating the pick up in the treasury yields with the supply wave. The US government will sell $258 billion worth of debt this week to fund the biggest tax reform in 30 years and a 2.5-year federal spending package.

That said, the treasury yields may rise further if the minutes of the January Fed meeting due today offers insight into why the officials added the word “further” twice to their statement. 

A Bloomberg report says, "at Chair Janet Yellen’s last meeting Jan. 30-31, the central bank pledged twice to make “further gradual adjustments” in interest rates as opposed to just “gradual adjustments” at the prior gathering. The language was consistent with adding more emphasis to the plan for rate hikes."