Treasury yields rise as traders strengthen Fed rate hike bets

Treasury yields edged higher on Friday as investor expectations for a December rate hike by the Federal Reserve gathered strength.

The 10-year U.S. Treasury note yield — the key benchmark for mortgages, auto loans and credit card debt — rose 1 basis point to 5.1230%.

The longer-dated 30-year Treasury bond yield, which tends to react to geopolitical risks, was 2 basis points higher at 5.4516%. The 2-year Treasury note yield, which is typically more sensitive to short-term Federal Reserve interest rate decisions, was 1 basis point lower at 4.8589%.

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

The upward moves come after 10-year Treasury yields jumped more than 13 basis points to more than 5% during Thursday's session, and the 2-year yield soared more than 15 basis points.

Investors now see a Federal Reserve rate hike next month as a near certainty. Traders are pricing in 100% odds of a rise at the Dec. 9 meeting, according to the CME Group's FedWatch tool. Odds of a 25 basis points hike now stand at almost 87%, with the chance of a 50 basis point increase at around 13%.

Energy inflation remains in focus, with oil set for its second weekly decline as the prospects of renewed strikes by the U.S. against Iran recede. Prices were choppy in early trade Friday. U.S. West Texas Intermediate futures for December delivery were down 0.1% at $88.63 per barrel. Brent crude was higher by 0.3% at $96.11.

October's producer price index — a key measure of wholesale inflation — is due later Friday. It is expected to show 0.4% growth for last month, compared to 1.3% in September's report.