Two-year Treasury yields were headed for their largest weekly increase in more than two years as traders raised bets on faster Federal Reserve rate hikes. Futures priced an 11% chance of a 50-basis-point hike in December, up from zero a week earlier.
Two-year Treasury yields were headed for their largest weekly gain in more than two years on Friday after hotter-than-expected consumer inflation and hawkish Federal Reserve commentary led traders to expect faster rate increases. October producer price inflation came in below economists’ expectations, though its annual gain was the largest in four years.
The two-year yield was last down 0.94 basis point at 4.855%, after reaching 4.892%, its highest since October 14. The benchmark 10-year yield rose 5.25 basis points to 5.156%, its highest since October 14. Futures traders priced an 11% chance of a 50-basis-point December hike, compared with zero a week earlier; the odds of cumulative 50 basis points of hikes by January rose to 66% from 16%.
Fed Governor Christopher Waller said the central bank should consider a half-point increase if inflation worsens. Boston Fed President Susan Collins said price stability benefits the housing market over the long term, despite potential near-term headwinds. Treasury Secretary Scott Bessent said the Fed should not raise rates because of an energy supply shock tied to the Iran war.
