Indonesia's 2-Year Government Bond Yield Reaches Highest Level Since 2007

The yield on the 2-year U.S. Treasury bond rose 5 basis points (bps) to 3.45% on Tuesday, June 14, 2022. This yield is the highest since November 15, 2007.

Similarly, the yield on the 10-year U.S. Treasury bond increased by 5 bps to 3.395% on Wednesday, June 15, 2022. This figure is also the highest since April 15, 2011.

High inflation and the threat of interest rate hikes have prompted investors to divest from risky assets such as stocks and cryptocurrencies, shifting their investments to safe haven assets like the U.S. dollar.

Amid global economic uncertainty, fund managers are also opting to allocate their portfolios to longer-term U.S. Treasury bonds. This has triggered a decline in yields on longer-term U.S. Treasury bonds.

Meanwhile, the yield on shorter-term bonds (2-year) has risen, along with falling prices.

The yield spread between the 10-year and 2-year U.S. Treasury bonds has shown a downward trend. The yield spread between these two tenors has remained below 100 bps since November 30, 2021.

In early April 2022, an inverted yield curve occurred, where the yield on the 2-year bond was higher than that of the 10-year bond. This condition is believed to signal that the U.S. economy will experience a recession within the next 20 months.

Last week, the U.S. government announced that inflation in May 2022 reached 8.6% (year-on-year/yoy). Then, overnight, the U.S. Federal Reserve (The Fed) raised its benchmark interest rate by 75 bps to a range of 1.5-1.75%.