Markets Price Four More Fed Hikes as Treasury Yields Climb

Markets are pricing in four more Federal Reserve rate increases by June 2027 as Treasury yields climb and Bitcoin falls below $83,000. The tightening of financial conditions across risk assets is causing a shift in market expectations.

The interest-rate futures imply the federal funds rate could rise from its current 3.75%-4% range to 4.75%-5% by June 2027. This reflects four additional increases of 25 basis points each, which would further increase borrowing costs.

Treasury yields have risen across the curve, with the 10-year yield moving above 5.1%, its highest level since 2007. The 20-year yield has approached 5.5%. The iShares 20+ Year Treasury Bond ETF has fallen below $80.

Bitcoin's price has dropped from a recent high near $87,500 to below $83,000. The dollar index has climbed above 101 and is up 3% this year, adding pressure to cryptocurrencies and other risk-sensitive assets. Gold has traded above $4,200 after falling 25% from its January record.

The market shift comes as stronger economic growth, renewed inflation concerns linked to tensions in the Middle East and heavy borrowing for artificial-intelligence infrastructure raise expectations for higher borrowing costs. Government bond yields have also increased in France, Germany, the United Kingdom, and Japan.