US Treasury Yields Spike Amid Fed Rate Hike Fears
US Treasury yields rose on Friday, with two-year yields hitting their highest since July 2024, as investors assessed the likelihood of further interest rate hikes. The Federal Reserve's first rate hike in three years this week has sparked worries about inflation, prompting a new global rate-tightening cycle.
The Bank of Japan raised interest rates to a 31-year high and its governor signaled the central bank has entered a phase focused on preventing inflation from overshooting its target. Fed Chairman Kevin Warsh's hawkish comments also contributed to the market's expectations of more hikes.
According to TD Securities' US rates strategist Molly Brooks, 'The two-year is going to be moving in tandem with hike pricing.' Traders see a more than 55% chance of another increase when the US central bank next meets in October, according to CME FedWatch. The yield curve between 2- and 10-year notes was last at 25.5 basis points, after earlier reaching 23.8 bps, the flattest since June 25.