US yields post largest weekly rise since mid-November

US Treasury yields rose on Friday, with 2-year notes touching a fresh 7-1/2-year high and other maturities hitting multiweek peaks as statements from Federal Reserve officials including Chair Janet Yellen appeared supportive of an increase to US overnight interest rates. Yellen's remarks at the Executives' Club of Chicago signaled to many market participants that the Fed was ready to pull the trigger on an interest rate increase this month.
"It sounds like all the ducks are in a row now," said Mike Collins, senior portfolio manager at PGIM Fixed Income in Newark, New Jersey. "There was some trepidation or concern that (Yellen) would sound more dovish and not talk about hiking in the near term and maybe push off the probability. I think that would've been a big mistake ... The market conditions are ripe, the economic conditions are ripe and the global conditions are ripe (for a hike)."
In addition to Yellen, four other top US central bank officials spoke at various times during the day. Fed funds futures prices show traders see more than an 85 percent chance of a rate increase this month, according to CME Group's Fed Watch tool. Trading was choppy during the day, with 2-year yields touching their highest level since August 2009, and benchmark 10-year yields rising to 2.507 percent, the highest since February 15. Yields on 7-year notes rose to 2.347 percent, also the highest since February 15.
While yields hit new highs during the day, they closed Friday's session little changed from their late Thursday levels. That was because investors had largely priced in a rate hike for March earlier this week, said Karyn Cavanaugh, senior market strategist at Voya Investment Management in New York. "The writing has been on the wall for the past couple of days," she said.
New York Fed President William Dudley and San Francisco Fed President John Williams both suggested in comments earlier this week that the Fed is poised to raise rates sooner rather than later. The widespread expectation of a Fed rate hike pushed benchmark yields up by 18 basis points for the week, the largest one-week increase since November 18, the week after the US presidential election.