The yield on 2-year US Treasury bonds. It is the most sensitive Treasury yield to Federal Reserve policy expectations.
Traders watch the 2-year yield as a real-time read on where the Fed funds rate is expected to be. A sharp rise signals the market expects more hikes.
When the 2-year yield rises above the 10-year yield, the curve is inverted — historically a recession warning. Falling 2-year yield signals expected Fed cuts.