The yield on benchmark 10-year Treasury notes rose to its highest level in more than 11 years Tuesday as investors priced in the likelihood of the Federal Reserve raising rates more aggressively this week as it looks to fight inflation. “After ending May at 2.74%, the 10-year yield has rocketed higher this month as hot inflation readings caused investors to dump bonds and ratcheted up their bets for aggressive Fed tightening,” CNBC reports. The 10-year yield started the year at 1.53%.
The 10-year yield saw its biggest jump since March 2020 on Monday after a Wall Street Journal report suggested that Fed officials would consider raising rates by 0.75 percentage points, the biggest increase since 1994, rather than the half-point hike that had been widely expected. The more aggressive action was made likely by a brutal inflation reading released late last week. The CME Group’s FedWatch Tool now sees a 95.8% chance of a 0.75 percentage point hike on Wednesday, up from 34.6% yesterday and 3.9% a week ago — and a similar likelihood of another 0.75 percentage point increase in July.