The US 2-year yield is up about 30 basis points on the week trading at 4.296%. The high-yield today reached 4.349% the highest level since March 15, 2023. The move to the upside this week is the largest gain since the week of September 19, 2022, when yields moved up nearly 34 basis points. Ironically, the yield settled at 4.212% that week just 8 basic points away from the current level of 4.296%.

The catalyst to the upside this week was a better tone in regional banks. That took some of the flight to safety flows out of the market and had traders pricing in more Fed cuts into 2024.

The KRE regional bank ETF rose by 7.26% this week.

Boston Fed president Logan yesterday said she would pencil in a 25 basis point hike in June given current economic data. Feds Bullard also tilted toward another 25 basis point hike.

The January fed funds futures now implies 4.65%. That is still below the current target rate of 5.25%, but the implied yield in May reached as low as 4% back on May 4 and 4.22% as recently as May 11.

Although higher, the 2 year yield is still well off its high for 2023 at 5.085% reached on March 8, 2023

Further out the yield curve, the 10-year yield is up 25 basis points this week, or 6.599%. That is its largest 1 week gain since December 19, 2022 week. The yield today moved to a high of 3.719% which is the highest level since March 13, 2023. The high-yield in 2023 reached 4.089% on March 2. The high cycle yield was back on October 21, 2022 at 4.335%

This article was written by Greg Michalowski at www.forexlive.com.