UST par yield curve (2Y) at end of Q2 2026

rationale:

As of June 18-19, 2026, the 2-year U.S. Treasury par yield is trading in the 4.18%-4.20% range cnbc.comfred.stlouisfed.orgfred.stlouisfed.orgcnbc.comycharts.comtradingeconomics.comfred.stlouisfed.org. Yields recently jumped 12-16 basis points following the June 16-17 FOMC meeting, which marked Chair Kevin Warsh's first meeting. While the target funds rate was held at 3.50%-3.75% federalreserve.gov, the Fed delivered a hawkish surprise by removing its easing bias and emphasizing solid economic activity alongside above-target inflation exacerbated by energy-related supply shocks federalreserve.gov. The June Summary of Economic Projections (SEP) reinforced this shift, with the median 2026 federal funds rate projection rising to 3.8% federalreserve.gov. Recent macroeconomic data has also supported elevated yields: May payrolls increased by 172,000 with unemployment steady at 4.3% bls.gov, while May headline CPI rose 0.5% month-over-month (4.2% year-over-year) and core CPI stood at 2.9% year-over-year bls.gov.

Looking ahead to the June 30, 2026 resolution date, there are only about seven trading days remaining (factoring in the Juneteenth market closure). The most significant scheduled catalyst before the end of Q2 is the PCE inflation report on June 25. Given the short horizon, the 2-year yield is expected to remain anchored near its current ~4.18% level, with a standard deviation of approximately 14-15 basis points to account for near-term volatility and PCE event risk.

Based on this central estimate and short-horizon volatility profile, a sharp collapse in yields is extremely unlikely, making thresholds from 3.00% to 3.20% virtually certain (99%) and a close above 3.90% highly secure (97%). Maintaining a yield above 4.00% (89%) and 4.10% (70%) remains highly probable, as it would require a significant dovish surprise or a sharp geopolitical flight-to-safety to fully unwind the recent post-FOMC repricing. Because the current spot yield sits directly at or just below the 4.20% threshold, a close above it is slightly worse than a coin flip (43%), reflecting mild mean-reversion risks following the recent spike. Higher strikes from 4.30% to 4.50% capture the right tail of the distribution, with probabilities falling off sharply (from 19% down to 2%); breaching these upper bounds before the end of June would require a materially hot June 25 PCE print or further aggressive hawkish repricing.