Treasury 2-year yield post-Fed spike 'exaggerated' or is there room for more? Strategists weigh in

Treasury yields rose and the curve flattened on Wednesday after the Federal Reserve held rates steady, but strategists were divided on whether the move would persist. That's occurring as the market brought forward expectations of the first rate hike after Fed Chair Kevin Warsh, whose inaugural policy meeting saw a dramatic slimming down of the Fed's post-meeting communication. Here's what market watchers are saying about Treasurys after the policy decision: Bank of America Bank of America strategists, including U.S. rates strategy head Mark Cabana, said they expect two-year Treasury yields to move higher, the gap between two-year and 10-year yields to narrow further and a flattening of the inflation curve. "On balance sheet policy, there were only small changes, with the Fed reaffirming its commitment to an ample reserve regime and Warsh announcing a balance sheet task force." Fundstrat Fundstrat technical strategist Mark Newton said the jump in the two-year Treasury yield to about 4.18%, its highest in two weeks, appeared exaggerated given improving geopolitical conditions. "The spike on the 2-year Treasury yield to two-week highs near 4.18% — occurring around resistance — as Warsh spoke, looks exaggerated against the ceasefire trade." Newton said the move did not appear significant enough to signal a lasting shift towards a more aggressive rate-hiking cycle. …