Yields on the two-year notes have picked up momentum since September, with the yield now up about three-quarters of a percentage points in the past four months, which suggests that traders may already be pricing in the expected rate hikes ahead.

In the meantime, short-term Treasury bond funds are looking more attractive after the recent fall off and bounce in yields.

For example, the iShares 1-3 Year Treasury Bond ETF (NYSEArca: SHY), which has a 1.9 year effective duration, has a 1.77% 30-day SEC yield. The Schwab Short-Term U.S. Treasury ETF (NYSEArca: SCHO), which has a 2.0 year duration, comes with a 1.85% 30-day SEC yield. The Vanguard Short-Term Government Bond ETF (NYSEArca: VGSH), which has a 1.9 year average duration, shows a 1.8% yield.

For more information on U.S. government debt, visit our Treasury Bonds category.