Bond Market Priced for Rate Hike as Traders See 58% Chance

The bond market is increasingly betting on an interest rate hike by the Federal Reserve to combat high inflation, according to recent data.

Traders now see a nearly 58% probability of a rate hike as soon as next month, up from 35% just a day earlier.

The two-year Treasury yield jumped to 4.35% from 4.22% before the speech by Chairman Kevin Warsh at an annual economic symposium in Jackson Hole, Wyoming.

Warsh emphasized the importance of short-term interest rates as the predominant tool for the Fed to control inflation and maintain a strong job market.