Investors are increasingly treating the selloff in short-dated U.S. Treasuries as a potential buying opportunity after the two-year yield rose to around 4.75%, a multi-year high and roughly 1.4 percentage points above its February low. Futures markets price about 0.8 percentage point of additional Federal Reserve tightening over the next year, following comments from Fed Chair Kevin Warsh that signaled an aggressive approach to inflation. Some investors argue that much of this outlook is already reflected in two-year yields, leaving room for prices to rebound if inflation cools or the Fed raises rates less than markets expect. At its September 15-16 Federal Open Market Committee meeting, the Fed lifted its benchmark rate by 0.25 percentage point to 3.75%-4.00%. Officials project one more increase this year and rates holding steady through 2027, while bond markets price the possibility of more aggressive tightening. Two-year Treasuries are particularly sensitive to Fed policy, but generally have less price volatility than longer-dated debt. Allspring Global Investments increased bond holdings after Warsh emphasized price stability at Jackson Hole, and strengthened that position after the latest Fed meeting. The Treasury is scheduled to auction $69 billion of two-year notes on September 22 and $70 billion of five-year notes on September 23. Risks include persistent inflation, elevated energy prices linked to prolonged wars in the Middle East and Ukraine, and stronger-than-expected U.S. economic growth. Bank of America strategists have also warned investors to consider the possibility of the benchmark rate rising above 5%. The two-year yield is around 4.75%, above the 4.68% federal funds rate projected for September 2027 in the swaps market, reinforcing the view that expectations for further tightening may be excessive. Strategists including Kevin Flanagan of WisdomTree, George Bory of Allspring Global Investments and Trevor Greetham of Barings continue to identify investment value at the short end of the yield curve.