Treasury yields head higher after Fed’s Barkin sees more rate hikes

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U.S. yields jumped Friday morning, led by the policy-sensitive 2-year rate, after one Federal Reserve policy maker reinforced the central bank’s message that more rate hikes are needed to bring down inflation.

What’s happening

  • The yield on the 2-year Treasury

    was 4.741%, up 9.3 basis points from 4.648% on Thursday.

  • The yield on the 10-year Treasury

    was 3.768%, up 4.1 basis points from 3.727% on Thursday.

  • The yield on the 30-year Treasury

    was 3.868%, up 2.1 basis points from 3.847% on Thursday.

What’s driving markets

In remarks made on Friday, Richmond Fed President Tom Barkin said strength in consumer spending and the labor market are keeping upward pressure on inflation. Stubborn inflation may require more rate hikes and he would be willing to support further increases in rates, he said. Barkin is not a voting member on the Federal Open Market Committee this year.

Earlier on Friday, Fed Gov. Christopher Waller said fallout from several bank failures earlier this year is likely to continue to play a role in the central bank’s thinking on how much to raise interest rates.

Investors have been doubtful the Federal Reserve would deliver two more 2023 rate increases, as projected by policy makers in forecasts released on Wednesday.

However, following Barkin’s remarks on Friday, traders priced in a slightly higher chance of a quarter-of-a-percentage-point rate hike in September following a similar move in July, which would take the Fed’s main policy rate target to between 5.5%-5.75%.

Data released on Friday showed that the University of Michigan’s consumer sentiment index rose to 63.9 in June from 59.2 previously.

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