Fed Rate Hike Odds Shift to 80% for September as Hawkish Signals Jolt U.S. Bond Market on June 18

According to Goldman Sachs Asset Management, market expectations for Federal Reserve rate hikes shifted forward significantly on June 18. Chief investment strategist Kay Haigh noted that dovish signals surprised traders, who rapidly increased bets on earlier rate increases. Market data now prices in over 80% probability of a rate hike at the September Fed meeting, with expectations for multiple hikes by October—a dramatic shift from Tuesday's view that the earliest hike could occur in December.

The 2-year Treasury yield surged 13 basis points on Wednesday, marking its largest single-day move since April 2025 and matching the largest one-day yield jump on any Fed decision day since 2008. Haigh indicated volatility in shorter-duration bonds will likely intensify as markets refocus on inflation control and the Fed signals reduced forward guidance reliance, instead emphasizing data dependence. The 30-year Treasury yield touched a two-month low on Thursday.