Rate Hike Expectations Soar! Traders Bet on 50% Probability of Fed Rate Hike Before October, US Treasury Yields Surge

SnapshotLaborer · 2026-03-20T14:56:08+00:00

The US Treasury market experienced a selloff on Friday, with yields rising broadly. Traders have increased their bets on Fed rate hikes to 50%. Market concerns about Middle East conflict potentially pushing up global inflation have led investors to revise their interest rate expectations. The two-year Treasury yield climbed above 4%, reaching a multi-month high, impacting money market expectations.

SnapshotLaborer

2026-03-20 14:56:08

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U.S. Treasury yields fell on Friday, as bond traders increased bets on the Federal Reserve raising interest rates. The probability of a rate hike by the Fed by October has risen to 50%. Media reports indicate that markets are concerned that a prolonged Middle East conflict could push up global inflation.

On Friday, the $31 trillion U.S. Treasury market experienced a wave of selling, with yields across all maturities rising by 9 to 13 basis points, led by the two-year Treasury. The two-year yield is most sensitive to monetary policy. The five-year Treasury yield broke above 4% for the first time since July, while the benchmark 10-year Treasury yield rose over 11 basis points to 4.375%, reaching its highest level since August.

The money market has increased the odds of a rate hike by the Federal Reserve this year to 50% by October, abandoning previous expectations before the outbreak of the Iran conflict on February 28 — when markets anticipated two 25 basis point cuts this year.

Gennadiy Goldberg, Head of U.S. Rates Strategy at TD Securities, said:

“As the Iran conflict continues to escalate and prolong, the U.S. Treasury market seems to be increasingly worried that inflation pressures will further rise.”

“The market is no longer pricing in rate cuts in 2026 and is now beginning to factor in a certain probability of rate hikes, which is driving a significant increase in Treasury yields.”

More updates to come

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