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Traders Lift Bets on a Fed Hike This Year to 50% as Yields Surge
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March 20, 2026
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6:52Now PlayingKaren Manna, Vice President and Fixed Income Investment Director at Federated Hermes, gives her outlook on the fixed income space as yields continue to surge on war-driven uncertainty.
US Treasuries sank and bond traders increased their bets on an interest-rate hike to 50% by October as concern that a protracted war in the Middle East could stoke global inflation.
A rally in the $31 trillion market on Friday sent yields higher by nine to 13 basis points across maturities, led by those on the two-year, which are among the most sensitive to monetary policy. Five-year yields surpassed 4% for the first time since July, while the benchmark 10-year yield rose 10 basis points to 4.33%, the highest since August.
Money markets lifted their wagers on a Federal Reserve hike this year to 50% by October, abandoning their expectation from before the Feb. 28 start of the Iran war for two quarter-point cuts.
“The Treasury market appears to be worried about further inflationary pressures as the conflict in Iran both escalates and drags on,” Gennadiy Goldberg, head of US rates strategy at TD Securities, said. “The market is no longer pricing in rate cuts in 2026 and is now starting to price in some chance of rate hikes, which is pushing yields sharply higher.”
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