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Or sign-in if you have an account.The Federal Reserve lowered rates three times last year on concern about weakness in the employment market, then paused amid indications of stabilization. Photo by Erin Scott/BloombergTraders in the US$31 trillion Treasuries market fully priced in a Federal Reserve interest-rate hike by the end of this year after United States job growth topped all forecasts in May, spurring yields higher.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorInterest-rate swaps showed traders bracing for a quarter-point increase in the U.S. central bank’s key rates by the December policy meeting, with a roughly 60 per cent chance that the move comes in October.A selloff in the Treasuries market pushed yields higher across maturities on Friday, with those on two-year notes — most sensitive to changes in U.S. central bank policy — jumping as much as 11 basis points to 4.15 per cent, the highest this year. The 10-year yield was higher by six basis points to 4.53 per cent. The dollar rose.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“The question is: Will the Fed get out ahead of where markets are pricing, or are markets going to try to push the Fed,” Jeffrey Rosenberg, senior portfolio manager at BlackRock, said on Bloomberg Television. “So far, it’s the latter.”That leaves policymakers, who will meet later this month for the first time under the leadership of Chairman Kevin Warsh, “playing catchup,” he said.The U.S. government bond market has undergone a profound shift since late February, when the U.S. attack on Iran led to a surge in oil prices and in both actual and expected inflation. That annihilated wagers on Fed rate cuts this year and forged a consensus that the next move will be a hike.On Friday, the recalibration toward more hawkish expectations got a boost from a better-than-expected reading of the U.S. labour market. Nonfarm payrolls increased 172,000 last month after upward revisions to the prior two months, according to Bureau of Labor Statistics data. That marked the strongest three-month advance in more than two years. The unemployment rate held steady at 4.3 per cent.The Fed lowered rates three times last year on concern about weakness in the employment market, then paused amid indications of stabilization. The central bank’s key rate has been a range of 3.5 per cent to 3.75 per cent since December.“Now we have jobs showing some recent acceleration, so the market has a second reason to consider hikes, especially in combination with inflation risks that remain with the Strait of Hormuz still closed,” said John Briggs, head of U.S. rates strategy at Natixis North America.Across Wall Street, most major banks have abandoned forecasts for cuts in 2026, though many still forecast at least one rate cut in 2027. Fed policymakers have in recent weeks also sounded more open to higher rates, with several indicating they can’t support cuts with U.S. inflation gauges exceeding the bank’s two per cent target by a widening margin.A reading of the U.S. consumer price index next week will offer the next major input for traders and Fed officials ahead of the June 16-17 policy meeting.“The number is strong and shows the job market is on the mend and inflation should be the focus of the Fed. The massive bear flattening of the curve just echoes that,” Tracy Chen, portfolio manager at Brandywine Global Investment Management, said. “We are at a juncture when inflation rate matches unemployment rate, the Fed may be behind the curve.”“The headline numbers and backward revisions in the May U.S. payrolls figures immediately vaulted 30-year yields back over five per cent. With the belly of the curve catching up on real yields, also expect continued curve flattening.”— Edward Harrison, Macro Strategist, Markets Live—With assistance from Elizabeth Stanton, Edward Bolingbroke, Carter Johnson and Ye Xie. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.