Investors are betting on shockingly high government interest rates in the US

In line with increased concern about US price increases, many investors assume that bonds will weaken more.

Some are preparing for the 10-year US government yield to break last year’s 16-year high, it was last October that the “ten-year” rose to 5 percent.

This is what Reuters reports and notes that bond yields, which move inversely to prices, have risen in recent weeks due to fears of sustained inflation and reduced hopes for interest rate cuts from the US Federal Reserve.

This year, the yield on the benchmark 10-year bond has risen 80 basis points and was last at 4.70 percent, which is said to be the highest level in five months.

“It all boils down to one word: inflation”

Now, several hedge funds and global fund managers are positioning to an extent not previously seen this year for continued rising interest rates in the wake of further weakness for bonds, according to data from Bank of America, BofA, the news agency reports.

“It all boils down to one word: inflation. If the market does not see signs that inflation is contained, there is no reason that interest rates will not continue to rise,” says Don Ellenbergersenior portfolio manager at Federated Hermes, told Reuters.

He believes interest rates could go as high as 5.25 percent.

On Thursday, another cold shower came for the Fed when statistics showed that the price index for personal consumption expenditures, excluding food and energy, increased much more than expected during the first quarter of the year.

Futures markets show investors now expect the Fed to cut interest rates by only 35 basis points this year, compared with expectations at the start of the year for a 150 basis point rate cut in 2024.

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