Fed: Fed rate hike in June has become a coin flip as yields climb

US interest-rate traders have upgraded to almost 50-50 the odds that the Federal Reserve will raise interest rates by 25 basis points in June.

Interest-rate swaps referencing the June meeting of the Federal Open Market Committee price in around 12 basis points of an increase. A full hike is fully priced into the September meeting, with a second hike by February 2023.

The yield on the two-year Treasury note, meanwhile, climbed as much as 4 basis points Friday, topping 0.40% for the first time since March 2020. In eurodollar futures, rates are higher by as much as 10 basis points, also reflecting elevated expectations for Fed rate increases. The moves accelerated after data showed September retail sales rose more than expected.

A hike in June would put the first increase right around — or potentially even before — the time that the Fed has suggested asset-purchase tapering might end.