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Fed’s Daly said that the Fed would likely raise rates by 50 basis points at a couple of Fed meetings, and that they will deliberate with members whether rate hikes at 25, 50, or 75 basis points are needed. Keeping the 75 basis points in play as yields moving to the upside across the yield curve.
The two year yield has risen to a high of 2.718%. That is the highest rate in the recent rate cycle to the upside and the highest level since toward the end of December 2018. The high cycle yield at that time reached 2.977% (see chart above).
Where was the Fed funds rate at that time?
The peak in the Fed funds rate height cycle in 2018/2019 stalled at 2.5%. Fed officials have been saying that the Fed would work its rate back toward neutral defining the neutral rate as 2.0% to 2.5%. The current Fed funds target rate is well below the 2.5% rate, but market rates have already done most of the tightening for the Fed.
Meanwhile, the other yields along the curve are showing:
- five year 2.983%, +11.8 basis points
- 10 year 2.937%, +10.1 basis points
- 30 year 2.966%, +8.8 basis points