US Treasury yields rise as investors weigh outlook for rate hikes

US Treasury yields were higher on Friday as investors evaluated the outlook for interest rates following the Federal Reserve's first rate hike in three years this week.

Investors are eyeing the prospect of a new global rate-tightening cycle as worries about inflation have mounted.

On Friday, the Bank of Japan raised interest rates to a 31-year high and its governor signaled the central bank has entered a new phase focused on preventing inflation from overshooting its target.


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The Fed on Wednesday raised rates and flagged more hikes in the coming months, while Fed Chairman Kevin Warsh delivered hawkish comments.

"The two-year is going to be moving in tandem with hike pricing," said Molly Brooks, US rates strategist at TD Securities.

"There's more risk (of) pricing in more hikes than pricing out hikes at this point."

Traders see a more than 57% chance of another increase when the US central bank next meets in October, according to CME FedWatch. That expectation was at 53% late Thursday.

Investors will weigh upcoming data for clues about the US economic outlook.

Yields mostly held gains after data on Friday, including a report showing US factory production unexpectedly fell in August after seven straight monthly increases.

Spikes in oil prices tied to the US-Israeli war on Iran have been behind some of the inflation concern.

US crude oil prices edged higher on Friday amid continued anxiety about a widening of conflict across the Middle East.

The yield on the benchmark US 10-year Treasury note was last up 4.9 basis points at 4.996%. It reached 5.041% on Tuesday, the highest since 2007.

The two-year US Treasury yield, which typically moves in step with interest rate expectations for the Fed, was up 4.7 basis points at 4.737%.

The yield on the 30-year bond rose 3 basis points to 5.326%.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 25.5 basis points.