Fed Rate Hike Fully Priced In by Year-End After Robust US Jobs Report

Treasuries tumbled and traders fully priced in a Federal Reserve interest-rate hike by December 2026 after US job growth in May far exceeded forecasts. The selloff drove two-year yields up eight basis points to 4.12%, while 10-year yields rose six basis points to 4.53%. Nonfarm payrolls increased 172,000 last month, with upward revisions to the prior two months marking the strongest three-month advance in more than two years, according to the Bureau of Labor Statistics’ June 5 release. Traders now see a roughly 60% chance of a quarter-point hike as soon as October, with a move fully discounted by December. Before the data, the next hike was expected in March. “The market now has a second reason to consider hikes, especially with inflation risks that remain,” said John Briggs, head of US rates strategy at Natixis North America, citing the recent jobs acceleration. The Fed’s key rate has been held at 3.5% to 3.75% since December 2025.