Will the 2-year Treasury yield dip below 4.70% before 2027?

The market resolves on whether the US 2-year Treasury yield dips below 4.70% at any point before the end of 2027. The 'Yes' side currently trades at 68%, implying a move of roughly 30 basis points from current levels. Our model puts the probability at 90%, because the Fed's rate path and the macro backdrop strongly favor lower yields.

Key facts: the policy rate sits in restrictive territory, inflation is decelerating toward the 2% target, and futures already price several cuts across 2026–2027. Each 25bp cut typically pulls the 2-year yield down by 20–30bp, and historically the 2-year has fallen 150–250bp from peak during easing cycles. Even one or two cuts would almost certainly push the yield below 4.70%.

The market may be underpricing this outcome due to inertia: traders remember sticky 2022–2023 inflation and fear the Fed stays hawkish longer. But for the outcome to win, the yield only needs to touch 4.69% once at any point before end-2027 — a low bar given the current trend.

Main risks: a renewed inflation spike, rising deficits and auction yields, or a hawkish Fed pivot. If inflation returns above 4% or the labor market overheats, the yield could stay above 4.70% and the idea would fail.