Two-year Treasury yields were headed for their largest weekly gain in more than two years as traders increased bets on faster Federal Reserve rate hikes. The 2-year yield was up 0.34 basis point at 4.867%, while the 10-year yield rose 4.64 basis points to 5.149%.
Two-year Treasury yields were headed for their largest weekly increase in more than two years on Friday after higher-than-expected consumer inflation and hawkish Federal Reserve commentary led traders to increase bets on faster rate hikes. Yields briefly dipped after October producer-price inflation came in below economists’ expectations, though the annual gain was the largest in four years.
Fed funds futures showed a 10% chance of a 50-basis-point hike at the Fed’s December 8-9 meeting, up from zero a week earlier. The odds of cumulative hikes of 50 basis points by January rose to 67% from 16%, while the chance of 75 basis points of hikes by March increased to 48% from 6%. The 2-year yield reached 4.892%, its highest since October 14, and the 10-year yield reached 5.174%, also its highest since October 14.
Several Fed officials said inflation could require tighter policy. Governor Christopher Waller said the Fed should consider a half-point increase in December if inflation worsens, while Boston Fed President Susan Collins said tighter policy was coming and San Francisco Fed President Mary Daly said her bias was toward raising rates.
