US Treasury yields climb as markets price in December Fed hike

US Treasury yields rose sharply on Friday as financial markets decisively shifted their expectations for Federal Reserve policy.

For the first time in the current cycle, traders are pricing in a potential rate hike as early as December, marking a dramatic reversal from the prevailing consensus of further easing.

The repricing was driven by a series of unexpectedly high inflation readings that have eroded confidence in a near-term pivot to lower rates.

Fed funds futures now reflect a growing probability that the central bank may need to tighten policy again to ensure inflation returns to target, rather than continuing its cutting cycle.

This shift has sent ripples through the bond market, with yields on key benchmarks climbing as investors adjust their portfolios to a higher-for-longer rate environment.

The move underscores the sensitivity of fixed-income markets to inflation data and the Fed's dual mandate.