U.S. Treasuries set for largest weekly selloff since Trump's "Liberation Day" tariffs, market bets on consecutive Fed rate hikes

BlockBeats news, November 13 - According to the Financial Times, driven by higher-than-expected US inflation and hawkish remarks from Federal Reserve officials, US Treasuries are set for the largest weekly sell-off in more than 18 months. The 10-year Treasury yield rose to 5.12% on Friday, up 26 basis points from the end of last week, marking the largest weekly increase since Trump announced "Liberation Day" tariffs in April 2025. The 2-year Treasury yield, more sensitive to rate expectations, rose 32 basis points this week to 4.85%, the largest weekly increase since the end of 2024.

US October CPI rose 0.4% month-on-month, above market expectations. Fund managers and traders said many investors re-entered Treasuries after the September sell-off, betting the global bond market rout was over, but were forced to retreat after the inflation data, exacerbating the rise in yields. Matt Scott, global head of trading at AllianceBernstein, said long positions in Treasuries built by active managers over the previous two weeks had been largely unwound in the past two to three days.

As of Friday, the market had fully priced in a 25 basis point rate hike by the Fed in December, and still sees a small probability of a 50 basis point hike. Fed Governor Waller previously said that if inflation remains elevated, a 25 basis point hike alone could damage the Fed's credibility. Cleveland Fed President Hammack also said on Thursday that rates need to rise to curb inflation. The market has now largely priced in a second consecutive hike in January next year, compared with only a 10% probability a week ago; a cumulative third hike by June next year has also been fully priced in.