Bond Traders Bet Big on Fed Rate Hike Amid Inflation Fears

Bond traders have taken an increasingly bearish stance ahead of this week's Federal Reserve meeting. Despite inflation concerns, market participants are placing bets that the central bank will deliver a rate hike in response.

The benchmark US 10-year yield has surged to its highest level since 2007, reaching new heights on Tuesday. The two-year yield also hit its highest mark since 2024, further highlighting the growing bearish sentiment among traders.

This extreme short positioning is largely driven by the recent Treasury selloff, which has led to a significant increase in yields. Traders are now bracing for the Fed's decision on interest rates, with many expecting an upward move to combat inflation worries.