The 2-year Treasury is often used as a measure of where the Fed optimizes short-term borrowing rates. “The bond market is continuing to price in a more aggressive policy tightening by Federal Reserve based on still-high inflation and the Fed’s more hawkish guidance,” said Kathy Bostjancic, the chief U.S. financial market economist at Oxford Economics. “A fairly aggressive Fed tightening path will lead to somewhat lower valuations as economy-wide growth should slow as the Fed tries to soften the pace of demand,” Bostjancic added.