US 2-Year Treasury Yield (DGS2)
Daily yield on the US 2-year Treasury constant-maturity benchmark (DGS2) from 2000 onwards. The cleanest single gauge of market-implied Fed policy expectations over the next 24 months. Moves ahead of Fed Funds decisions and provides the leading edge of every macro pivot. Includes the October 2023 cycle peak (5.20 percent) and the August 2011 / March 2020 zero-bound prints. AUD-trader framing on Fed reaction-function reading and AUD/USD short-rate differential.
Chart
Daily US 2-year Treasury constant-maturity yield. The cleanest Fed-expectations market gauge. Recession-shaded.
What does the 2Y yield tell you?
The 2-year Treasury yield is the market's pricing of the average Fed Funds rate over the next 24 months plus a small term premium. It is updated daily, intraday-liquid, and effectively reflects the bond market's current best estimate of Fed policy.
Mechanically: if the market expects the Fed to hold rates flat at 5 percent for 2 years, the 2Y should price near 5 percent. If the market expects an average of 4 percent (because cuts are priced in over the 24 months), the 2Y prices closer to 4 percent. The gap between the 2Y and the current Fed Funds rate is therefore a measure of how much cutting or hiking the market expects.
Trader takeaway
- Falling 2Y = market pricing cuts. Risk-asset friendly (lower discount rate, lower carry cost on leverage). Coincides with AUD/USD strength.
- Rising 2Y = market pricing hikes. Risk-asset hostile. AUD/USD weakness.
- 2Y dropping below Fed Funds. Bond market disagrees with the Fed on hold; effectively pricing in coming cuts. Watch for the Fed to capitulate within 3-6 months.
- 2Y vs Fed Funds futures. Fed Funds futures (CME FedWatch) provide the explicit market-implied probability of each future Fed decision. The 2Y aggregates the path. Use both for verification.
Methodology
- Source. FRED series DGS2 (daily, constant-maturity, par yield).
- Endpoint. Public fredgraph.csv.
- Recession shading. NBER-dated US recessions.
- Static-first. Seed file ships with quarterly anchors interpolated to daily.
Related tools
- 10Y Treasury Yield - the long-end pair.
- 2Y/10Y Yield Curve - the recession-indicator spread.
- Fed Funds Rate - the policy rate anchor.
- CPI Inflation YoY - what drives the 2Y.
Frequently asked questions
It is the par yield on a notional 2-year Treasury, computed daily by the US Treasury (FRED series DGS2). Mechanically it reflects the market's expectation of the average overnight Fed Funds rate over the next 24 months plus a small term premium. When the market expects the Fed to cut, the 2Y falls; when it expects hikes, the 2Y rises. The 2Y typically moves 1-2 weeks ahead of explicit Fed signalling.
The 2Y is short enough that almost all of its variation is driven by Fed-policy expectations. The 10Y has substantial term-premium and long-run-growth-expectations contribution that obscure the policy signal. For 'what is the Fed expected to do in the next 12-24 months', the 2Y is the cleanest single market read. For 'what does the bond market think about long-run inflation and real growth', the 10Y is better.
Three channels. (1) AUD/USD: US 2Y vs ACGB 2Y differential is one of the highest-beta drivers of AUD/USD on horizons of weeks to months. (2) AU short-end yields track the US 2Y closely - AU 3Y futures are watched alongside the US 2Y as a global short-rate complex. (3) Crypto and equity carry positioning: leveraged risk-asset positions price off short USD rates. A falling 2Y is a tailwind for risk-asset carry; a rising 2Y is a headwind.
The 2Y peaked at 5.20 percent in October 2023, the highest since 2006-07. The peak coincided with the 10Y peak (5.02 percent), reflecting the market fully pricing in the higher-for-longer Fed framework before the November 2023 dovish pivot. By March 2024 the 2Y had fallen to around 4.30 percent and continued lower through 2025-2026 as the Fed cut. The 2Y is the standard 'pivot signal' for traders watching macro inflection points.
The difference between the 10Y and the 2Y is the most-watched yield-curve indicator. A positive spread (10Y > 2Y) is the normal slope; a negative spread (yield curve inversion) has historically preceded every US recession since 1955 by 12-24 months. The inversion that began in July 2022 lasted until late 2024, the longest in US history. The 2Y/10Y curve has its own dedicated chart on this site.
FRED series DGS2 (daily, constant-maturity, par yield), fetched live on every build. The series begins June 1976; this chart starts from 2000 to focus on the modern monetary-policy regime.
About the author
