Bond traders have significantly increased their wagers for a July interest-rate hike as markets brace for critical US inflation data and congressional testimony from Federal Reserve Chair Jerome Powell. The shift reflects growing conviction that the central bank will need to resume tightening after a pause in June.

Swaps pricing now shows a higher probability of a 25-basis-point increase at the July 25-26 FOMC meeting, up from roughly even odds a week earlier. Traders are parsing every economic release for signs that price pressures remain sticky enough to warrant further action.

The upcoming consumer price index report and Powell's semiannual monetary policy testimony before Congress will provide fresh clues on the trajectory of inflation and the Fed's reaction function. Core inflation has proven resilient, keeping the door open for additional hikes.

Meanwhile, Treasury yields climbed across the curve, with the two-year note sensitive to policy expectations rising to its highest level since March. Investors are also monitoring comments from other Fed officials for consensus on the path forward.