Traders are increasingly expecting four more Federal Reserve rate hikes, with rising Treasury yields and a stronger U.S. dollar creating additional pressure for bitcoin and gold.
U.S. government bond yields are advancing across the curve as markets prepare for a longer period of restrictive monetary policy. CME FedWatch data shows a federal funds target range of 4.75% to 5% by June 2027 as the most likely scenario.
Reaching that level would require four 25-basis-point increases from the current 3.75% to 4% range. The Fed has already raised rates by 25 bps this month.
The rise in yields is affecting Treasuries across maturities. The 20-year yield is nearing 5.5%, sending the TLT long-term Treasury ETF to record lows below $80. The 10-year yield has also moved past 5.1%, its highest level since 2007. Similar moves are occurring overseas, with government bond yields under pressure in France, Germany, the U.K. and Japan.
Higher yields and dollar appreciation are weighing on risk-sensitive assets. The dollar index has climbed above 101 and is up 3% this year. Bitcoin has fallen below $83,000 after reaching a local peak of $87,500, while gold remains slightly above $4,200, marking a 25% decline from its January all-time high.
A combination of economic and inflationary pressures is driving Treasury yields higher. The S&P Global composite PMI, which measures activity across the manufacturing and services sectors, rose nearly 4.3% to 58.4 in September, exceeding market expectations.
Middle East tensions have added another layer of uncertainty to the inflation outlook, helping lift oil and diesel prices.
Bond supply is also increasing as companies and governments borrow heavily to fund AI infrastructure. This creates additional competition for investor capital alongside Treasuries. Stronger growth, persistent inflation risks and increased financing needs are therefore contributing to higher yields.
The Japanese yen has weakened further against the dollar, with the exchange rate returning to around 159 yen. The move has reversed much of the yen’s recovery toward 153 that followed reports of U.S. and Japanese intervention last month.
Markets will now watch whether expectations for additional Fed tightening continue to push Treasury yields and the U.S. dollar higher.
