US Treasuries Face Largest Weekly Sell-Off Since Trump Tariffs as Market Bets on Fed Rate Hike

US Treasuries are expected to see their largest weekly sell-off in over 18 months, influenced by unexpected inflation and hawkish statements from the Federal Reserve. The yield on the 10-year Treasury rose to 5.12% on Friday, up 26 basis points from the previous weekend, marking the largest weekly increase since the tariffs announced by Trump in April 2025. The yield on the 2-year Treasury increased by 32 basis points this week to 4.85%, the largest weekly rise since the end of 2024. The October CPI rose 0.4% month-on-month, exceeding market expectations, prompting investors to withdraw from US Treasuries. The global trading head at Invesco stated that actively managed institutions have largely exited their previously established Treasury buying positions in the last two to three days. The market has fully priced in a 25 basis point rate hike by the Fed in December, with a small probability still assigned to a 50 basis point increase. Fed Governor Waller indicated that if inflation remains high, a mere 25 basis point hike could undermine credibility. Cleveland Fed President Harker also stated that rates need to be increased to curb inflation. The market has essentially priced in a second consecutive rate hike in January next year, whereas just a week ago, the probability of this hike was only 10%; the cumulative third rate hike before June next year has also been fully accounted for.