US government bond yields rose to fresh multiyear highs as oil prices extended their surge, prompting traders to increase bets that the Federal Reserve will raise interest rates as soon as next week. Treasury yields climbed six to eight basis points across maturities, with the 30-year bond reaching levels last seen in 2007 and the two-year note exceeding 4.5% for the first time since 2024. Traders boosted expectations for a Fed rate hike next week to about 70% and fully priced in a move by October instead of December.

The rise in yields reflects growing market anticipation of tighter monetary policy amid persistent inflation pressures from energy markets. Oil’s advance has intensified concerns that the Fed may need to act sooner than previously expected to curb inflation. The two-year Treasury yield, a key indicator of near-term rate expectations, surpassed 4.5%, marking a significant milestone not seen in over two years.

Meanwhile, the 30-year yield climbed to its highest level since before the financial crisis, underscoring long-term inflation and growth worries. Market participants are now closely watching upcoming economic data and Fed communications for confirmation of the policy shift. The bond market’s reaction highlights the sensitivity of fixed-income assets to commodity-driven inflation signals.

Traders are adjusting portfolios in anticipation of a more aggressive tightening cycle. The shift in pricing suggests a recalibration of the Fed’s policy timeline, with October now viewed as the likely starting point for rate hikes.