US Treasuries / 2-year yield
We’ve already had cuts this year and even more are priced in through the end of 2026.
The December cut probability is sitting around 86.4%, and the market is pricing a 78.9% chance of 3+ cuts by late 2026.
And yet the 2-year yield remains stuck at a stubborn 3.50%, the same level we saw at the lows back in September 2024.
Now, we’ll certainly see it much lower if USD liquidity issues really take hold, but that’s still uncertain. What is certain is the massive wave of debt rolling over in 2026.
My view is that in case of serious trouble, we’ll get a radical, coordinated response from both the Fed and the government, all the governments really. There’s very little tolerance for pain right now in developed economies.
