The 30-year Treasury yield is up by 11.2 bps to 5.125% on Friday, registering its highest level since April 2007 amid concerns surrounding inflation and rate hikes. As inflation rises, investors demand higher returns to protect purchasing power. Furthermore, expectations of rate hikes push down bond prices, which drives yields higher.
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New trading tool for QQQ bullsInflation fears rose this week after the Bureau of Labor Statistics (BLS) announced the Producer Price Index (PPI) rose 6% year-over-year in April, the highest growth since 2022.
Fed Rate Hike Odds Surge
In addition, the Consumer Price Index (CPI) increased by 3.8% for the 12 months ended April, the highest rate since 2023.
With higher inflation, the Fed is less incentivized to cut interest rates. By year-end, the odds of one rate hike on the CME FedWatch tool are at 38.9%, up from 13.6% a week ago. The odds of two hikes are at 9.9% compared to 0.7% a week ago.