US Treasury investors are turning their attention to holding short-term bonds, betting that the Federal Reserve will eventually win against inflation. In a few days after the Federal Reserve raised interest rates for the first time since 2023, 2-year Treasury yields soared to a multi-year high of around 4.75%. The futures market expects monetary policy to be tightened by another 80 basis points over the next year, which shows that Federal Reserve Chairman Kevin Walsh's promise to fight inflation is gradually being recognized by traders. Bullish investors believe that the hard-hit 2-year treasury bond prices already reflect these expectations, and treasury bond prices may respond if inflation improves or if the Federal Reserve raises interest rates less than expected. On the second day after the Federal Reserve meeting, a large number of such bets emerged. There is strong demand for options that would benefit from lower interest rates on guaranteed overnight financing. This interest rate is closely related to policy expectations.

US Treasury investors are turning their attention to holding short-term bonds, betting that the Federal Reserve will eventually win against inflation. In a few days after the Federal Reserve raised interest rates for the first time since 2023, 2-year Treasury yields soared to a multi-year high of around 4.75%. The futures market expects monetary policy to be tightened by another 80 basis points over the next year, which shows that Federal Reserve Chairman Kevin Walsh's promise to fight inflation is gradually being recognized by traders. Bullish investors believe that the hard-hit 2-year treasury bond prices have reflected these expectations, and treasury bond prices may respond if inflation improves or if the Federal Reserve raises interest rates less than expected. On the second day after the Federal Reserve meeting, a large number of such bets emerged. There is strong demand for options that would benefit from lower interest rates on guaranteed overnight financing. This interest rate is closely related to policy expectations.