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Investors in the US Treasury market are increasingly favoring shorter-dated government bonds, a positioning that reflects a bet on the Federal Reserve's success in curbing inflation.
Two-year yields have climbed to a multi-year high of approximately 4.75% following the central bank's first rate increase since 2023.
The recent surge in yields follows a selloff in the underlying bonds, with futures markets now pricing in an additional 80 basis points of monetary tightening over the coming year.
This shift suggests that market participants are gaining confidence in the credibility of Federal Reserve Chairman Kevin Warsh's commitment to aggressively combat inflation.
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