2-year Treasury yield tops 4% for the first time since 2007

The yield on the 2-year Treasury note topped 4% for the first time since 2007 on Wednesday as traders awaited the Federal Reserve’s decision on interest rate hikes.

The yield on the benchmark 10-year Treasury was last at 3.536%, down by roughly 4 basis points. Meanwhile, the policy-sensitive 2-year Treasury rose 4 basis points to 4.006%. Both Treasury notes had reached highs on Tuesday, rising to levels last seen in 2011 and 2007, respectively.

Yields and prices move in opposite directions and one basis point is equivalent to 0.01%.

The Federal Reserve is expected to announce interest rate hikes aiming to control inflation on Wednesday as its September meeting comes to a close. Analysts are broadly expecting a 75 basis point hike, but some think the central bank will go beyond this to 100 basis points. That would mark the largest interest rate hike in 40 years.

But even that may not be enough, Michael Schumacher, head of macro strategy at Wells Fargo Securities, told CNBC’s “Fast Money,” explaining that while he is expecting a 75 basis point hike, he would argue for a 150 basis point hike as he believes rates are headed higher still.

Treasurys could also be a source of safety for investors, he added.

“Relative safety I would look at the front-end of the U.S. Treasury curve. You’ve got the 2-year treasury yielding just about 4%. It’s gone up enormously,” he said. “If you think about the real yield, which a lot of people in the bond market focus on, it’s probably not a bad place to hide out.”

Before investors and traders hear from the Fed, they will get further insights into the housing market as home sales data for August is due to be released.

(With Inputs from cnbc)

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