The 10-year Treasury yield jumped to its highest rate since 2011 as investors brace for the possibility that the Federal Reserve will hike interest rates more than previously expected.
Benchmark 10-year yields hit 3.518% on Monday before bouncing back down to below 3.5%. Two-year yields inched up to 3.961%, their highest level since 2007.
The August CPI report rattled investors by coming in hotter than expected, increasing the odds that the Fed will be forced to hike rates even more in order to drive down inflationary pressures. Investors now see an 82% chance of a 75-basis-point hike and an 18% chance that the Fed will raise rates by a whole percentage point at once, according to CME Group’s FedWatch tool, which calculates the probability using Fed fund futures contract prices.
Further muddying the waters for the central bank’s rate hikes and the prospect of a recession was a gloomy report from shipping giant FedEx that Deutsche Bank characterized to clients as the “weakest set of results we’ve seen relative to expectations” in two decades.
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