: 2-year Treasury yield falls below 3.9% day after Fed rate hike, pointing to widening disconnect between markets and central bank

The policy-sensitive 2-year Treasury yield fell 9 basis points to 3.879% on Thursday, a day after the Federal Reserve lifted interest rates above 5%. The yield is headed for its third straight decline in as many days, reflecting a widening disconnect between markets and the central bank on the direction of policy. Analysts said that divergent paths between the 2-year rate and the fed funds rate have historically meant that the market thinks the Fed is making a policy mistake. Traders continued to price in an almost certain chance of at least one, but most likely at least three, rate cuts this year. Six-month through 7-year yields were all lower Thursday morning, while the 10-year and 30-year yields were little changed.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.