Rate Expectations (2Y − Fed Funds)
Rate Expectations is the 2-year Treasury yield minus the effective federal funds rate — the cleanest single read on what the bond market expects the Fed to do next. The 2-year prices roughly the average policy rate over the next two years of meetings, so when it trades below the funds rate the market is pricing cuts, and when it trades above, hikes. The gap's size says how much.
2Y − fed funds spread
- 2-Year yield
- 4.19%
- Fed funds (eff.)
- 3.63%
- Spread percentile
- 0.56%60th pctile
Next release: Aug 24, 2026
Latest reading
The bond market is pricing rate hikes: as of August 20, 2026 the 2-year yield sits 0.56pp above the fed funds rate. As of August 20, 2026, Rate Expectations (2Y − fed funds spread) stands at 0.56pp — unchanged from 0.56pp the prior reading. Above zero, the market is pricing tightening; below zero, easing — and historically the 2-year moves months before the Fed follows, making sustained sign changes in this spread one of the earliest policy-pivot signals available. Deeply negative readings (−1pp and beyond) have marked the market forcing the Fed's hand ahead of recessions (2000, 2007, 2019, 2024); readings near zero mean the Fed is roughly where the market wants it. It measures expectations, not their wisdom — the market has priced pivots that never came. Series history runs from 1976 to present.
Sources, methodology & freshnessLast updated 2026-08-21 · Open ↓Close ↑
Full history
2Y yield minus fed funds
2-Year Treasury yield
The 2-year yield itself — roughly the average policy rate the market expects over the next two years of FOMC meetings.
Effective fed funds rate
The daily effective federal funds rate — the policy rate the spread is measured against.
Methodology & data
Rate Expectations is sourced from Fed via the Federal Reserve's FRED service (Federal Reserve via FRED (DGS2, DFF), daily). We pull the complete history, chart it on a daily basis, overlay SPY for context, and generate a dated plain-English reading from the latest release — with no smoothing or adjustment beyond what the chart legend states.
Every reading is stamped with its release date, last updated 2026-08-21. Maintained and reviewed by Yuriy Matso; see our methodology for the standards every series on the site is held to.
Frequently asked questions
What is the Rate Expectations (2Y − Fed Funds)?
Rate Expectations is the 2-year Treasury yield minus the effective federal funds rate — the cleanest single read on what the bond market expects the Fed to do next. The 2-year prices roughly the average policy rate over the next two years of meetings, so when it trades below the funds rate the market is pricing cuts, and when it trades above, hikes. The gap's size says how much.
How do you read Rate Expectations?
Above zero, the market is pricing tightening; below zero, easing — and historically the 2-year moves months before the Fed follows, making sustained sign changes in this spread one of the earliest policy-pivot signals available. Deeply negative readings (−1pp and beyond) have marked the market forcing the Fed's hand ahead of recessions (2000, 2007, 2019, 2024); readings near zero mean the Fed is roughly where the market wants it. It measures expectations, not their wisdom — the market has priced pivots that never came.
Where does the Rate Expectations data come from?
Federal Reserve via FRED (DGS2, DFF), daily. We chart the full history and publish a dated, plain-English reading with every release; the raw series is downloadable as CSV at /data/indicators/rate-expectations.csv.
How often is Rate Expectations updated?
Rate Expectations is a daily series from Fed, refreshed here as soon as a new release posts to FRED.
2Y − fed funds spread
- 2-Year yield
- 4.19%
- Fed funds (eff.)
- 3.63%
- Spread percentile
- 0.56%60th pctile
Next release: Aug 24, 2026