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Traders have ramped up bets on Federal Reserve rate increases, now fully pricing three half-point rate rises over the next few months following the above-expected inflation data.
Inflation increased 8.6% in May from a year ago, the fastest increase since December 1981, topping expectations.
Meanwhile, the 30-year Treasury yield dipped below the five-year for the first time in a month.
Markets are forecasting a 50-basis-point rise in June, July and September, adding 75 basis points of tightening by the Federal Reserve since the start of 2022.
A report by Bloomberg stated swap contracts referencing Fed policy meeting dates repriced to levels fitting to expectations the US central bank will also raise rates in September.
Michael Darda, the chief economist at MKM Partners, told Bloomberg that “the Fed is still behind the curve.”
