Treasuries-US yields rise after inflation data fuels rate hike bets

The benchmark 10-year yield briefly touched 4.9915% on Friday after data showed U.S. consumer prices sped up last month as the cost of gasoline rebounded after two straight monthly declines. The Labor Department's Bureau of Labor Statistics said the Consumer Price Index (CPI) increased 0.4% in August after rising 0.1% in July. In the 12 months through August, consumer prices rose 3.4%.

In response, traders ramped up bets that the Fed would raise rates by 25 basis points on September 16 at its two-day meeting, to an 86.8% probability from 67.5% before the release, according to LSEG data.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 32.9 basis points, after touching its flattest level since July 29.