Two-year Treasury yields hit highest since 2009

US two-year Treasury yields hit their highest in more than 7-1/2 years on Thursday, while other US yields hit multi-week or multi-month highs on increasing expectations that the Federal Reserve will raise interest rates at its March meeting.
Fed funds futures on Thursday implied traders saw a 79.7 percent probability of a Fed rate increase at its March 14-15 policy meeting, up from 66.4 percent on Wednesday, according to data from CME Group's FedWatch program. Expectations for a hike jumped after hawkish comments on Tuesday from New York Fed President William Dudley and San Francisco Fed President John Williams.
Yields on US two-year notes, which are considered most vulnerable to Fed rate hikes, hit their highest since August 2009 at 1.340 percent. The three-year yield
reached a nearly 11-week high of 1.617 percent, while the benchmark 10-year hit a more than two-week high of 2.505 percent.
Dudley, one of the most influential US central bankers and a permanent voting member on the Federal Open Markets Committee, said the case for tightening monetary policy soon had become "a lot more compelling," while Williams said: "I personally don't see any need to delay" raising rates.
"There has been more and more of the FOMC coming out with the acknowledgment that (March) is a live FOMC meeting and that they should raise rates soon," said David Coard, head of fixed income sales and trading at Williams Capital Group in New York. "All of those things have put the market on notice."
In addition, Fed Governor Lael Brainard said Wednesday that an improving global economy and a solid US recovery meant it would be "appropriate soon" for the US central bank to raise interest rates.
US 30- and seven-year yields hit more than two-week highs of 3.101 percent and 2.344 percent, respectively, while five-year yields touched a two-month high of 2.049 percent.
"People are just positioning themselves for a March rate hike," said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.
Analysts said long-dated yields moved higher since investors were taking Fed officials at their word that US inflation and the labour market were improving. Expectations of higher inflation tend to lower longer-dated bond prices and push up their yields since it erodes their interest payouts.
US 10-year notes were last down 7/32 in price, while their yield rose to 2.491 percent from 2.462 percent late Wednesday.