The Two-Year Did the Repricing: 14 Basis Points on Friday, and a Flatter Curve Into September

by Nora Halloran · August 31, 2026

Senior Analyst, US Market Current

The repricing that followed Chair Kevin Warsh's Jackson Hole keynote did not land evenly on the Treasury curve. It landed almost entirely on the front end — and the resulting shape, more than the level of any single yield, is the market's clearest statement about what it now expects from the Federal Open Market Committee on September 16.

The Treasury Department's Daily Par Yield Curve Rates show the two-year note at 4.34 per cent on August 28, up from 4.20 per cent on August 27 — a move of 14 basis points in a single session. The five-year rose to 4.48 per cent from 4.38 per cent, a 10-basis-point move. The 10-year rose to 4.73 per cent from 4.67 per cent, six basis points. The 30-year moved four, to 5.22 per cent from 5.18 per cent. The three-month bill rose six basis points, to 3.90 per cent from 3.84 per cent.

That is the signature of a policy-rate repricing rather than a change in the market's view of long-run inflation or term premium. Maturities inside the reach of the next few FOMC meetings absorbed the news; maturities beyond it barely registered.

The curve flattened by eight basis points in a day

The arithmetic of the shape follows directly. On August 27 the gap between the two-year and the 10-year stood at 47 basis points; on August 28 it stood at 39. The two-year to 30-year spread narrowed from 98 basis points to 88. Both gaps are calculated from Treasury's own published daily par yield curve rates.

Seen across the whole of August the pattern is the same, only slower. On August 3, the first business day of the month, Treasury's series had the two-year at 4.25 per cent, the five-year at 4.40, the 10-year at 4.70 and the 30-year at 5.23. By August 28 the two-year had risen nine basis points and the five-year eight, while the 10-year was up three and the 30-year was a basis point lower than where it started the month. The three-month bill ended the period a basis point below its August 3 level, at 3.90 per cent.

The month was not a straight line. The two-year traded as low as 4.15 per cent on August 13 before its Friday jump to 4.34, a 19-basis-point range from trough to peak. The 30-year reached 5.30 per cent on August 17 — its high in the Treasury series so far this month — and fell to 5.16 per cent on August 25, its low, the same session in which the two-year touched 4.17 and the 10-year 4.64. Friday undid a good deal of that late-month rally at the short end and comparatively little of it at the long end.

What the Fed has actually said

The policy backdrop against which the front end moved is a target range of 3-1/2 to 3-3/4 per cent, held at the July 29 meeting on a 9-3 vote. Beth M. Hammack, Neel Kashkari and Lorie K. Logan each preferred to raise the range by a quarter point at that meeting. The statement recorded that "Inflation remains elevated relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy."

Warsh's August 28 keynote, titled "In Our Time," put the 12-month change in the PCE price index at 3.7 per cent and the six-month change at 4.1 per cent, and said that "Inflation is running above our 2 percent target. So the Fed's predominant focus right now should be on prices." He described the labour market as "quite stable," with a jobless rate of 4.1 per cent that "remains low by historical standards," and framed his own position as a matter of process rather than a commitment: "I stand here today committed to a discipline, not to a decision."

Third-party compilations of futures pricing moved sharply in response. Bitcoin.com News reported the CME Group FedWatch tool at 57 per cent for a quarter-point increase at the September 16 meeting as of August 28, against 43 per cent for a hold and 39.9 per cent as of August 21, with the range moving to 3.75 to 4.00 per cent if the Committee acts. Kalshi's news arm reported on August 29 that its own contract showed 47 per cent for a hike against 54 per cent for a hold, up from roughly 30 per cent beforehand, and cited, via CNBC, a CME FedWatch reading of 55.7 per cent. Those are readings of derivatives and prediction markets published by third parties, not statements by the Federal Reserve, and the gap between the two venues is itself a reminder of how much disagreement sits behind a single headline probability.

The equity market sorted itself the same way

Friday's equity tape divided along a similar seam. The Russell 2000 fell 1.39 per cent to close at 2,972.37 — by a wide margin the worst performance of the four major U.S. indexes. The Nasdaq Composite fell 0.52 per cent to 26,402.42, the S&P 500 fell 0.25 per cent to 7,711.76, and the Dow Jones Industrial Average was essentially unchanged, down 0.02 per cent at 53,559.99. Those closing levels are consistent with the point changes Yahoo Finance's AlphaCheck column reported against Friday's close in Monday morning trading.

Small-capitalisation companies carry more floating-rate debt and refinance more often than the large-cap index constituents, which is the standard explanation for why the Russell reacts more violently than the Dow to a shift in the expected path of the policy rate. Whether that explanation holds for any particular session is not something a single day's index prints can settle — but the ordering on Friday was consistent with a market moving its rate expectations, not its growth expectations.

No intraday Treasury yield is quoted here for Monday, August 31: Treasury publishes its par yield series after the close, and the August month-end curve will not be final until the session ends at 4 p.m. ET. What is already fixed is the shape the market carried out of Friday and into this week — a front end nine basis points higher than it began August, a long end that sat a basis point below its August 3 level, and 39 basis points between the two- and 10-year notes.